WASHINGTON—After 41 years of charging most older Americans the same price for the same care, Medicare will require affluent seniors to pay higher monthly premiums for coverage of doctors' visits, diagnostic tests and outpatient hospital care beginning in 2007.
A little-known provision of the 2003 Medicare Modernization Act calls for an estimated 1.5 million seniors to face premium hikes ranging from 10 to 55 percent over the next three years if they earn at least $80,000 a year, or $160,000 for married couples. Seniors who earn more than $200,000 and couples with incomes over $400,000 will see their so-called "Part B" premiums rise the most.
The move, designed to help shore up Medicare's shaky finances, has enraged many because it was adopted without public debate. A Republican-led conference committee added the measure to the Medicare bill even though neither the House of Representatives nor the Senate version contained it.
Medicare, the national health plan for the elderly and people with disabilities, faces an uncertain future due to rising health-care costs, a growing number of beneficiaries who utilize more services and a dwindling tax base to support the program.
The premium increases are expected to boost revenue by about $7.7 billion from 2007 to 2011, and $20.8 billion from 2007 to 2016.
The 2007 "Medicare and You" handbook, which will be mailed to all beneficiaries in October, will explain the changes. The Social Security Administration will mail out reminders in November.
Outgoing Medicare Administrator Mark McClellan said that gradually increasing the share that high-income beneficiaries paid was necessary to sustain the program.
"We don't want people to pay a large share of their income for their Medicare benefits, but we also want to make sure these benefits are available for everyone for many years to come," he said.
Senior advocacy groups such as AARP, the Medicare Rights Center and the Senior Citizens League oppose the change. They say high-income beneficiaries paid more into Medicare during their working lives and shouldn't have to pay more now. They also argue that the higher rates will dissuade seniors from seeking jobs.
Even more troubling, they say, is that Congress increased the premiums without public debate.
"This was slipped in in the dead of night behind closed doors," said Robert Hayes, the director of the Medicare Rights Center.
Others worry that the new premiums could lead healthier, wealthier seniors to depart the Part B program, leading to higher costs for those who remain. "With fewer people in it, the price has to go up to sustain the system," said Shannon Benton, the executive director of the Senior Citizens League. "Our fear is it will increase premiums for even the lower-income people."
McClellan said the added expense could cause up to 50,000 seniors to leave the program next year and even more after that. But he said their exodus wouldn't alter the program's risk pool enough to increase the cost of coverage dramatically.
Other opponents of the move say the premium increases don't address the real problem of rising health-care costs but merely shift the burden of paying for them.
"Continually shifting the cost onto the people is not the answer," said David Certner, the legislative policy director at AARP. "We need to figure out why we're spending so much more as a nation on health care and our health outcomes are no better than average."
Medicare and Social Security enjoy great popularity and political support because of their themes of universal coverage. Medicare advocates fear that the income-related rate hikes could chip away at that foundation, making it easier for Medicare opponents to further erode program benefits.
"The beauty of these programs is you have everybody paying in and everybody getting benefits," Certner said. "If you make (Medicare) less valuable to some people, there's more of a chance that they won't want to be in the program and that they won't want to support the program as well."
The income thresholds that trigger the higher premium rates will be adjusted for inflation each year. President Bush's 2007 budget proposal calls for eliminating those adjustments, however. Doing so could nearly double the number of affected seniors to 8 percent of beneficiaries by 2016, McClellan said.
Seniors who drop their Part B coverage can re-enroll later but must pay penalties to make up for premiums they missed, McClellan said.
Rep. Nita Lowey, D-N.Y., has introduced legislation to repeal the rate hikes, but the bill has stalled in a House committee.
Medicare premiums are updated annually under a formula set by statute. The law requires that Part B beneficiaries pay 25 percent of the program's premium costs; the federal government pays the other 75 percent.
In 2006, beneficiaries' Part B premiums were $88.50 a month. Medicare officials expect that to rise to $98.40 when they announce the 2007 rates later this month.
Seniors who earn $80,000 to $100,000 a year—and married couples with incomes of $160,000 to $200,000—will pay an even higher rate, about 28.3 percent of the total premium cost. That works out to roughly $111.38 per month based on Medicare projections. In 2008, those same beneficiaries will pay 31.6 percent of total premium costs, and 35 percent in 2009.
Individuals who earn $100,000 to $150,000—and married couples with incomes of $200,000 to $300,000—will see their premium costs increase by 25 percent—roughly 8.3 percent a year—from 2007 to 2009. Their 2007 Part B premiums will increase to roughly $131.06.
Individuals earning $150,000 to $200,000—and couples with incomes of $300,000 to $400,000—will face premium increases of 40 percent—about 13.3 percent a year—from 2007 to 2009. That works out to a 2007 premium of roughly $150.74 a month.
Individuals who earn $200,000 or more and couples who earn more than $400,000 will face the largest increases. Their Part B premiums will jump 55 percent over the next three years, about 18.3 percent a year. That works out to a premium of roughly $170.42 in 2007 based on current Medicare projections.
(c) 2006, McClatchy-Tribune Information Services.
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