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The Future of Medicare: 15 Proposals You Should Know About

Pros and cons of options on the table in Washington

8. Raise Medicare Premiums for Everyone

Most Medicare beneficiaries pay a monthly premium for doctor visits (Part B) and prescription drug coverage (Part D). 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 income above $170,000 pay higher premiums, which cover more than 25 percent of Medicare spending. Some proposals would increase premiums for everyone in Medicare to cover a larger portion of the program’s costs. Under one proposal, the standard Medicare premiums would go up from 25 to 35 percent of program costs. If that proposal were to go into effect in 2012, the current $99.90 monthly premium for Medicare Part B paid by the typical beneficiary would cost 40 percent more, or an additional $40 per month. Part D premiums, which vary widely by plan and region, would increase similarly.

PRO: Increasing the basic premiums for Medicare Part B and Part D makes sense. It would help Medicare’s finances and can be done while protecting lower-income seniors. Parts B and D are voluntary “add-ons” to the Medicare coverage seniors receive for hospital services (also known as Part A), which Americans pay for through the payroll tax. A retired couple with, say, $120,000 of annual income from investments is certainly better able to pay a higher proportion of B and D costs than their $50,000-a-year working-age neighbor can pay in taxes, so it would make sense to raise premiums for many older people with incomes below the level where Medicare currently charges higher premiums. (Stuart Butler, Heritage Foundation)

CON: Some upper income Medicare beneficiaries can afford — and already pay — more than the normal premium. But for too many seniors, even current premiums are burdensome. Across-the-board premium increases would hit elderly and disabled single persons with incomes barely above $15,000 and couples with incomes above $23,000 who can ill afford higher charges. Raising premiums across-the-board is a terrible idea. (Henry J. Aaron, Brookings Institution)

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