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Medicare premiums could rise for many retirees

By Ricardo Alonso-Zaldivar

Associated Press

LAST UPDATED: 02:20 a.m. HST, Dec 20, 2012

WASHINGTON » 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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lynnh wrote:
If you voted for Obama, then you get exactly what you deserve. If you didn't vote for him, you should send you medicare bill to those who did!
on December 20,2012 | 01:45AM
kispest wrote:
Please send me a list of people whom voted for him, I will need it!
on December 20,2012 | 06:13AM
nomakeshame wrote:
You must not have read the first line that says President Obama and the Republicans embrace this plan. Actually, it is not a bad idea when you think about it. Why should someone who can afford it pay the same as someone who can barely afford it. It might be beneficial to those that can afford it to get private insurance instead of Medicare Part B and D.
on December 20,2012 | 06:30AM
hawaiikone wrote:
So why don't we charge $10/ gallon for the rich guys so we only have to pay $1 again? Same with food, utilities, and everything else! Brilliant! "To each according to his needs and from each according to his ability". Good thinking, Karl.
on December 20,2012 | 05:43PM
Grimbold wrote:
This comment has been deleted.
on December 20,2012 | 02:22AM
nitpikker wrote:
hmmm..so a simple solution is to make sure your life expectancy is only one year.
on December 20,2012 | 06:06AM
RetiredWorking wrote:
Grimbold, you're always good for a laugh at someone else's expense. Do so if you're inclined to. I humbly appreciate my government benefits such as GI Bill, SS and Medicare. I paid my fair share.
on December 20,2012 | 08:22AM
kispest wrote:
I guess, it is one way to eliminate old people, let them die without medical, because they won't be able to afford it. Your Government at work...most of you voted for them, enjoy!
on December 20,2012 | 06:18AM
RetiredWorking wrote:
kispest, in your train of thought, if you're fortunate, one day you'll be eliminated too. I enjoy free Medicare, WAY cheaper than $400-something-plus that State employees pay monthly. Wife pays $289 monthly.
on December 20,2012 | 08:26AM
control wrote:
the middle class and upper class has higher retirement funds because they work their behinds off. pre-retirement they pay more in fed/state tax, social security and medicare while working. now they can't use the benefit as other retirees? BS! that means it is better not to work than to work. GAME PLAN: After high school leech off of parents until they can't afford you, study fed/state income limits and have as much babies as possbile... apply for welfare (ie public housing, food stamp, free child care etc), and wait til 65 apply for medicare at discounted rate/ free! Let's quit our jobs today!
on December 20,2012 | 07:15AM
kispest wrote:
If I would be still in High School, I would follow your plan. Maybe in my next life, if we still have the same type of politicians in power.
on December 20,2012 | 07:26AM
RetiredWorking wrote:
control, ah, but with your plan, there's no extra $$ for the finer things in life that paychecks provide. When I start to envy welfare folk for getting free bennies, then I realize how much they miss out in life by not having any disposable income. And of course, there are the intangibles that hard work offers, like pride, confidence, self-esteem, etc. I'm middle class. I like working my behind off, but that only happens every so often.
on December 20,2012 | 11:14AM
GWakai02 wrote:
So much for: "will not increase a thin dime more."
on December 20,2012 | 07:38AM
HD36 wrote:
Put members of Congress on the same health plan as the rest of us and we'll save even more.
on December 20,2012 | 07:51AM
cojef wrote:
That is the most sensible post I have seen all day. Truer words were never written, why should the princes and the princesses be accorded other than that is offered to the masses. They have deemed themselves above the masses and are entitled to their princely roles. Elitism still prevails in America. So what's new, about this privileged class of know nothing's?
on December 20,2012 | 08:04AM
RetiredWorking wrote:
cojef, totally agree w/you on that.
on December 20,2012 | 11:14AM
hawaiikone wrote:
There's been a petition going around for a long time suggesting a new amendment that would require any law made by congress to be applied equally to them as well as those they govern. It seems so logical and beneficial I've always wondered why it never picked up any steam until I realized it would have to be introduced by someone in congress.
on December 20,2012 | 05:51PM
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