Fiscal Cliff Deal Could Mean Higher Medicare Premiums for Many Retirees

RICARDO ALONSO-ZALDIVAR


WASHINGTON (AP) - It's a health care change that President Barack Obama and Republicans both embrace: Expand a current, little-known law so more retirees the government considers well-off are required to pay higher Medicare premiums.

That plan is likely to be part of any budget deal to reduce the overhang of federal debt, raising $20 billion or more over 10 years. It could come as a shock to many seniors who will have to pay the higher premiums even though they consider themselves solidly middle-class, and by no means wealthy.

That's what happened to Tom James. He and his wife recently got an official notice that they will have to start paying more for Medicare next year, about $1,000 for the two of them. James is among the 5 percent of beneficiaries currently facing higher "income-related" premiums. If the budget change goes through, that number will grow to 25 percent.

"I was blindsided," said James, a retired bank examiner who lives near Philadelphia. "The camel has got his nose in the tent now, and the question is how far do they want to go with that?"

The idea is to continue broadening the reach of income-based Medicare premiums introduced under former President George W. Bush and later expanded by Obama's health care law.

How would it work?

It's complicated. Think of it as two bites.

First, the current income-based monthly premiums for Medicare's outpatient and prescription drug coverage would be ratcheted up. Those surcharges now are assessed on a sliding scale, and kick in for individual beneficiaries making more than $85,000, or $170,000 for couples.

Second, the number of beneficiaries who have to pay those higher monthly premiums would gradually expand by a few hundred thousand people each year. That would be done by extending a temporary freeze on the income thresholds at which the higher premiums are assessed.

Without adjusting those thresholds for inflation, 1 in 4 beneficiaries would be on the hook eventually, compared with about 1 in 20 now.

Backers of the idea - Obama administration officials, prominent Republicans in the House and Senate and nonpartisan experts - say it's foolish for Medicare to keep subsidizing people who can afford to pay their own way, particularly when the program faces long-range financial problems.

"What we're talking about here is a premium structure that makes sense, by slowly covering less and less," said Robert Bixby, executive director of the nonpartisan Concord Coalition, which advocates reducing the deficit. "Politicians have been afraid to charge full fare because of public reaction. But that time is coming to an end."

Medicare serves about 50 million Americans, including seniors and disabled people. Half have annual incomes below $22,500.

Technically, the program's outpatient and prescription coverage is optional. In practice, it's too good a deal to pass up. By law taxpayers cover 75 percent of the premiums, and beneficiaries pick up the remaining 25 percent.

That's the way it works for most people. Medicaid pays premiums for the poor, while people the government considers well-off shoulder an increasing share of premiums, starting at 35 percent and going all the way up to 80 percent for individuals making more than $214,000 and couples over $428,000.

Polls show that Americans clearly prefer raising premiums on wealthy beneficiaries as opposed to a general increase. However, few people are aware that the government is already collecting higher premiums from some beneficiaries. Very few know the details.

"I think wealth is in the eye of the beholder," said Tricia Neuman, a Medicare expert with the nonpartisan Kaiser Family Foundation. "This premium affects people with incomes starting at $85,000, but in the discussion over taxes $85,000 is not generally considered high income."

AARP says hiking the premium would be equivalent to a tax.

"This is a payment to the federal government based on your income, and that is a form of a tax," said David Certner, legislative policy director for the older people's lobby.

Not so, says Bixby. Even the wealthiest beneficiaries still get some subsidy under the plan, just not a 75 percent price break.

AARP also worries that charging seniors more based on income could taint Medicare as a welfare program, undercutting its political support.

James, the Philadelphia-area retiree, said the higher premium feels like a tax to him. "I'm making a payment to a government program," he said.

He said he figures he and his wife were probably pushed over the threshold because of distributions from retirement accounts that people in their 70s are required by law to take.

It's causing him to rethink how he feels about Medicare. James said he takes medication, but is in excellent health overall. So he basically gets just a handful of pills from Medicare, and he figures he can afford that on his own.

"I call it my breakfast of champions," he said.

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126 Comments

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Will & Marty

The most important aspect Medicare provides is comprehensive health care coverage for the elderly at a cost which is not based on previous health history. I don't want a free ride. I want coverage that protects my wife and me at a fair price. I do not object to paying more for coverage based on my income.

Please understand that medical technology has advanced so far from where I was a young boy that it is a major cause for living longer. I have had two heart procedures that were not available 30 years ago. So I would probably be dead without those procedures. Those procedures are expensive. It took research and training to develop. You have to pay the price.

Those older conservative friends of mine who complain of the socialistic trend in this country better look in the mirror. You are going to have to pay more for health care. Otherwise, we will not be able to afford the medical advances that keep us going. Support higher medical costs based on income.

January 01 2013 at 7:17 AM Report abuse rate up rate down Reply
gmydogbud

Those in Government should be made to REPLACE - ALL - THE - MONEY - THEY - HAVE - TAKEN - from Social Security, for THEIR - PET - PROJECTS - THEY - NEED - TO - PAYUP - & - DO - IT - NOW - !!!

December 22 2012 at 5:53 PM Report abuse +1 rate up rate down Reply
SeaBreeze4994

Lets face it ,, no matter who you vote for there going to pick on the middle class and the older Americans , they have no one else to screw .. How can older folks possible pay all this on a social security check, and a very small pension . rent , water, power you can not even watch a TV show with out a 80.00 basic cable bill ? plus house ins , car ins , Health ins, food ? i take it when you retire your just suppose to go kill yourself ,, Lovely way to treat our elderly , they have worked 40 to 60 yrs to get to this point , for the young well now they know what they must do ,, save every dime you can get ,, But for what it use to cost older folks could have a small retirement before they kicked off ,, But not anymore , and with no time left to save or do more ,, those capable of working longer but there are no jobs to get , As we get older we see after 55 no one wants you anymore ,, God bless America , We have tuned into selfish, greedy people with no regards for anyone other than our selves ,, ******* liars

December 21 2012 at 3:22 PM Report abuse +1 rate up rate down Reply
Cool Hand

I'm 68 years old. I've worked and paid into the social security and medicare insurance system every year. And I'm still working, although I draw a social security benefit most of which goes to taxes (income, property, school, sales, etc.). The irony is that I am still paying social security and medicare taxes, I am paying income tax on all of my income, including the social security benefit, and I just received a notice that my medicare premium is increasing 250%, even though I don't use the system by still pay taxes into it.
I don't consider myself wealthy, and I've worked my entire life. I don't see how I can stop...Well, there is one way, but right now it's not very appealing...

December 21 2012 at 2:59 PM Report abuse +1 rate up rate down Reply
panchotc2

There are two sure things in life; death and taxes, and no way to avoid either of them.

December 21 2012 at 2:34 PM Report abuse rate up rate down Reply
rjdver47

WHAT DID YOU EXPECT DIFFERENT FROM THIS PRESIDENT AND YOUR VOTE FOR HIM??

December 21 2012 at 1:53 PM Report abuse +2 rate up rate down Reply
johnaltojr

What do you mean could! Where have you been the cost has been rising 8-12% per year for the last 5 years

December 21 2012 at 1:49 PM Report abuse +1 rate up rate down Reply
artccaton

Sorry about that - it kept saying to try again, so I did

December 21 2012 at 1:44 PM Report abuse rate up rate down Reply
olehippi

I' just received an increase. I noticed that my Social Security payment this month (December) included a cost increase for Medicare of just over $5.00 this month. No explanation was offered.

December 21 2012 at 11:51 AM Report abuse rate up rate down Reply
1 reply to olehippi's comment
bandy4321

Explanation...medical costs going up so therefore premiums must go up. Also premiums are going up due to Obamacare. Remember they took out $760 million to help fund this mess.

December 21 2012 at 3:20 PM Report abuse +2 rate up rate down Reply
Rich

People with retirement incomes of more than $85,000 per year are not hurting. It's those whose completely rely on SS because they have no other income that cannot afford any increases.

December 21 2012 at 11:30 AM Report abuse rate up rate down Reply
2 replies to Rich's comment
gmydogbud

With respect - it all depends on which part of the country in which you live. Also it is not easy to relocate to another area of the country, as you loose your support system - (family and friends)! Just a thought!!

December 22 2012 at 5:42 PM Report abuse +1 rate up rate down Reply
gmydogbud

It all depends on the part of the country in which you live. If you live on the coasts, then it is not enough to live on. Most Seniors in thes areas cannot move because then they will loose their support system - family and friends. Eighty or eightyfive thousand in the middle of the country is one thing but on the coasts it is peanuts. Home taxes alone in these areas start at ten thousand a year and up!!

December 23 2012 at 9:13 PM Report abuse rate up rate down Reply