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The Future of Medicare: 15 Proposals You Should Know About

Pros and cons of options on the table in Washington

2. Raise Medicare Premiums for Higher-Income Beneficiaries

Most Medicare beneficiaries pay a separate monthly premium for doctor visits (Part B) and prescription drug coverage (Part D) in Medicare. The premiums people pay for parts B and D cover about 25 percent of what Medicare spends on these services. Individuals with annual incomes of more than $85,000 and couples with annual incomes above $170,000 pay higher premiums, up to three times the standard premium depending on income level. Under several proposals, these higher-income beneficiaries would be required to pay as much as 15 percent more than they currently pay.

PRO: The best way to generate more premium revenue to help pay for Medicare parts B and D is to raise premiums for higher-income seniors. That would improve Medicare’s finances by bringing in more premium revenue, but without imposing burdens on modest-income seniors. When Medicare was created in 1965, the vision was that the health benefits beneficiaries received should be adequate for all and should also be roughly the same for rich and poor alike. But even if that made sense at the time, the costs of Medicare are rising at a rapid clip, and we just cannot afford that vision any more. That’s why we’ve already accepted the principle that better-off beneficiaries should pay more for their parts B and D benefits. (Stuart Butler, Heritage Foundation)

CON: On the surface, it may seem reasonable to charge Medicare beneficiaries with higher incomes more for the same parts B and D coverage. However, in reality, many of these proposals will push costs on to more middle-class beneficiaries, particularly if the income level at which individuals are subject to the higher premium continues to be frozen, or even reduced. In addition, higher-income beneficiaries already pay more money into the Medicare program before retirement, and they also pay more in premiums for Medicare parts B and D — they should not have to pay even more for the same coverage as other beneficiaries.

Also, some higher-income beneficiaries may decide it is more advantageous to drop out of parts B and D if they are able to buy less expensive private coverage or simply self-pay for the physician visits and medications. If enough higher-income beneficiaries drop out of parts B and D, the premiums for Medicare parts B and D will need to increase for beneficiaries who remain in the program, making Medicare participation more expensive for almost everyone. (Avalere Health)

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