Why the 2007 Medicare Means Test is a Good Idea

A little-known provision of the legislation that created the Medicare drug plan (Part D) is a means test for the Part B premium which covers doctor visits, outpatient hospital care and other medical services not requiring hospitalization.

Beginning next year, beneficiaries whose annual earnings top $80,000 will be required to pay a larger premium. In 2007, the basic premium for Part B will increase from $88.50 per month to $100.40. Those who earn between $80,000 and $100,000 will pay an estimated $113.30 per month and the premium gradually increases to a limit of $173.30 for elders whose incomes are greater than $200,000.

In subsequent years, there will be additional premium increases for high-bracket earners. The Senior Citizens League has posted a chart of the increases along with the organization's objections to the means test which are as ho-hum and meaningless as every advocacy group's standard resistance to any change in the status quo before seriously considering its merits or lack thereof.

Predictably too, Rep. Nita Lowey [D-NY] has introduced a bill that would eliminate this first-ever means test. But the increased premium affects only three percent of Medicare beneficiaries (about 2.3 million out of the 36 million Medicare recipients) whose additional cost would amount to between $11.50 and $73 per month ($138 and $876 per year) - hardly a burden for elders in the $80,000 to $200,000 earnings bracket.

The average Social Security benefit is $917.90 a month and 22 percent of elders have no other income except Social Security. So the basic Medicare Part B premium is already a stretch for millions of people. Add in the cost of Medigap coverage, Part D premiums and co-pays and it’s obvious why some elder Americans must choose between food and drugs.

Healthcare is a human right and there is no reason those with more should not contribute more. We already accept this theory of social economics with a graduated income tax. To apply it to the most comfortable Medicare beneficiaries is a step in the right direction toward paying for Medicare costs as the large number of baby boomers soon begin to enroll. (The one glitch is that there is no bult-in inflation index which should be enacted.)

Universal healthcare is a better idea. With that, everyone is covered for basics and the rich can pay for whatever other healthcare they want. Until then, the means test is a responsible beginning to tax those who can afford it to ensure that everyone is covered.

Representative Lowey’s misguided bill to repeal the Medicare means test reveals where her priorities lie - with the people who have benefited from the president's tax cuts for the rich for the past five years. Anyone who lives in her Congressional district should keep this in mind when they vote in the November election.

Comments

[Milt]

They just keep whittling away at it don't they?

[AlwaysQuestion]

It doesn't seem unreasonable to me to ask someone with an income seven times higher than average to pay 13% more for their basic healthcare benefit.

[Dee]

Will wonders never cease? Why would anyone be against this bill? Am I missing something? Dee

[mr]

Those that have paid in the most pay for those who've paid the least. Gee, this sounds familiar==is the name Marx? The people most screwed by this are singles making one cent more than $ 79999 (as if couples ,who need to have an ajr of $160k or more, need more than one roof,etc,etc). Medicare becomes a welfare program.

[steven]

i feel you should not punish hard working people who by living a simple life with a zero pension have been able to save enough to produce a bond fund income of over 200 thousand per year why should i have to pay for the older people who have lived a life of wine woman and song the united was formed as a republic not a democacry in all honesty and i am sure everyone knows deep down in there soul there should be no medicare no social security no etc everyone should be responsible for themselves or it is called socialism lets get rid of all the hand outs the united states should be run as a corporation and the 5 percent of the people who pay 50 percent of the bills should have a bigger voice i give the united states maybe 20 more years and it will be just another communist socialist country all the hard working caplists will be long gone i grew up in wyoming with the words no free lunch but people now have no shame everyone has become a give me something for nothing take from those who work and live a simple life what has happened to the united states if only george washington could return remember they did not have free schools then either i have had my say i will go back in my cave i may sound like a billionaire which i am not but i do not believe in stealing from someone who has more than me i just wonder if anyone else believes like me sincerely steven

[Gary]

My objection to means testing has to do with the way it's calculated. I do not earn $80,000, but I have converted some IRAs to Roth IRAs bringing my income to over $80,000. I did this to make things easier for my heirs. It certainly hasn't increased my actual earnings, only my taxable income. This income should not be included in determining my "means" for the purpose of calculating medicare premiums.

[BRYAN]

PLEASE SHOW ME WHERE IT SAYS IN THE CONSTITUTION THAT WE ALL HAVE A 'RIGHT' TO HEALTH CARE. SOCIAL SECURITY AND MEDICARE ARE THE GREATEST SOCIAL EVILS OF OUR TIME BECAUSE IT HAS TURNED US INTO A NATION OF PEOPLE WHO ARE ALWAYS LOOKING FOR A HANDOUT AT THE EXPENSE OF THE REST OF THE CITIZENS. FOR INSTANCE THE PERSON ABOVE WHO SAYS IT DOESN'T SEEM UNREASONABLE FOR SOMEONE WITH AN ABOVE AVERAGE INCOME TO PAY MORE FOR HEALTH CARE AS IF IT IS ALRIGHT FOR THEM TO DECIDE WHAT IS TO BE DONE WITH MY MONEY. GET YOUR HAND OUT OF MY POCKET.

[ron mihalick]

one of the most obvious problems with these new provisions is that because they were put in by a small group at the last minute, they did not consider the detail and the impact on new retirees. Since Medicare premiums are based on a calendar year, and in their wisdon they decided to use the AGI as reported by IRS as the basis for the means test, they realized that they'd have to go back two years for the AGI on which to base the means test. That means that indiviudals who retire will have their means test based on the last two or three years of their employment when their AGI peaked rather than their retirement income which is likely to be about 50% or so of their AGI from the two year prior to their retirement. An individual who made $80000 a year while employed will be significantly penalized in the first several years of their retirement for their Part B premiums....even though their retirement income may be $40,000 or $50,000 a year as if they are the wealthy. An obvious solution to this is to adjust the AGI from the AGI filed two years prior to retirement for newly retired for the first two or three years by 40% - 50% which is likely to much more accurately represent their acutal retirement income than their AGI did the last two years of their employment when they were still employed and their AGI likely peaked. The fact that those who set this up this way sppstrnyly had no idea of what is so obvious in the way this would impact the newly retired reflects how out of touch the Washington inner circle is relative to real people and their situations. That is just sad.

[Cogit8r]

Seniors' subsidies (Social Security and Medicare) will have to be cut roughly 60% by 2040 to balance that year's budget. See the GAO's Long Term projections at GAO.gov.

Today's toddlers standard of living will be crushed by today's senior subsidies.

Means testing is a big part of using scarce resources equitably.