Medicare Premiums Increase for Higher-Income Seniors

Medicare’s traditional premium arrangement is changing – increasingly shifting costs to higher-income seniors.

Individuals with annual incomes over $80,000 and couples with incomes over $160,000 will pay higher premiums than other Medicare recipients. The higher the income, the larger the premium.

Under the changes, which become effective January 2007, Part B Medicare premiums – those covering physician and outpatient services — will increase to a minimum of $98.40 from $88.50. Depending on income, wealthier seniors will pay from $111.50 to $170.60 monthly the first year.

By 2009, when the phased-in changes are complete, monthly premiums could be as high as $172.80 to $395. At that time, wealthier seniors will pay more than triple the premiums of middle-income seniors – an increase that will affect about 1.2 million of Part B’s 40 million beneficiaries in 2007 and 2.8 million by 2013.

Supporters of the surcharge say it makes sense for the wealthy to pay more with Medicare costs soaring. But some Medicare experts worry that wealthy retirees will instead abandon the program for private insurance and leave only poorer and sicker people in the Medicare plan.

For now, the increased premiums are projected to save taxpayers $13 billion over 10 years, or about three-tenths of 1 percent of Medicare’s budget. Policy experts hope the changes and their impact focus attention on the program’s long-term health. “We have a crisis of entitlements on our hands,” said Matt Moore, a senior policy analyst with the National Center for Policy Analysis in Dallas, Texas. “We’ve been talking about Social Security, but we also need to have a national discussion about Medicare and how we’re going to pay its long-term costs.”

Source: Consumer Affairs