Two weeks ago a Midwest businessman sent an email to a long list of his senior friends warning that their Medicare Part B premiums would reach $247 a month by 2014. “These are provisions incorporated in the Obamacare legislation,” he wrote, and they “are purposely delayed so as not to cause Obama problems in the 2012 re-election campaigns.” He urged recipients to forward the email to “all seniors you know so they will know who’s throwing them under the bus. Remember This In November 2012 and vote!!!”
It sounded like a GOP campaign ad, and it may well have political roots for all I know, but it was part of a mass email that “has been circulating since before the 2010 elections” and “has no basis in fact,” wrote Patricia Barry, senior editor of the AARP Bulletin, last December. The message was still circulating in early July, when Kelly Greene of The Wall Street Journal reported that Journal readers had contacted the paper wanting to know if those numbers in the mass email were true. “The short answer is no,” Greene wrote. She went on to report that the Part B premiums for 2013 and 2004 have not yet been set.
This is another example of Medicare misinformation, and shows what reporters—and a very interested public—are up against as they try to understand and explain Medicare, the social insurance program that pays for healthcare for nearly 50 million Americans.
Lately, press coverage of Medicare has mostly focused on the back and forth between the Obama and Romney camps, in the wake of the president’s visit to Florida last week. For the most part, that coverage has been unhelpful to seniors—or anyone trying to figure out what is changing about Medicare.
But a great many people want to know about both how the changes might hit their wallets and purses, and journalists, not politicians, are going to have to shine the light. So in the interest of helping that process along, what follows is another of my Medicare beat memos.
Medicare can get complicated, so fasten your seat belts. But the bottom line is that some seniors are paying more—and others will pay more—for their Medicare benefits, because of changes called for both by the Affordable Care Act and by changes called for in the prescription drug law—the Medicare Modernization Act—passed in 2003, which gave seniors coverage for their medicines.
These changes affect both Medicare part B, which pays for doctor and lab services and outpatient hospital care, and part D, which covers pharmaceuticals. Both these benefits are financed partially by premiums paid by seniors themselves. And the real story is that seniors with higher incomes will be paying higher premiums for both their Part B and Part D services in the coming years. As for the political angle, it is worth noting that both Democrats and Republicans pushed the measures that will raise those premiums.
First, Part B. And, sorry, but this can be confusing: Way back in 2003, the law that gave seniors the drug benefit (Part D) also called for people with more income to pay higher Part B premiums. Before the Medicare Modernization Act, as the law is called, all seniors paid the same benefit for Part B services. But beginning in 2007 about two million seniors paid a higher premium for them as a result of the law, which was basically a Republican plan supported by some Democrats.
The income threshold that determined who paid the higher premium was indexed to inflation, so that about 5 percent of all Medicare beneficiaries would pay a higher premium each year, on a sliding scale. (In 2012, the income-related premium ranges from about $140 to $320 and affects individuals with incomes equal or greater than $85,000 and families with incomes over $170,000.)
The Affordable Care Act (ACA), passed in 2010 and recently ruled constitutional, changes the rules to require even more seniors to pay higher Part B premiums. It did that by freezing those income thresholds used to determine who pays more. Before the change, the threshold rose with the rate of inflation; now that the threshold is frozen, more people will be affected as their incomes inflate—at least from 2011 through 2019 when the old rules are scheduled to return By 2019, about 10 percent of all seniors will be paying higher Part B premiums.
The ACA also affected premiums seniors pay for Part D benefits—their drug coverage. And as with Part B, seniors with higher incomes will pay higher premiums for this coverage. From 2006, the time the drug benefit began, to 2011, premiums varied by which drug plan a senior chose, but seniors enrolled in the same plan within the same region of the country paid identical premiums. Now they don’t. This year about 3 percent of seniors who have the drug benefit (not all do) pay higher premiums; by 2019, about 8 percent will. This year the average monthly Part D premium is about $31, although the actual premiums also vary by the kind of plan, which is provided by private insurers. (Unlike other Medicare coverages, private insurers provide the drug benefit). Monthly premiums range from $15 to about $132.
Why the changes? Increased revenue from higher premiums along with cuts to Medicare—mostly in the form of payment reductions to hospitals and other providers—are part of a package of savings experts hope will reduce the cost of the Medicare program.
Higher premiums for Parts B and D also accelerate the shift occurring all across the healthcare system requiring consumers to pay more for their care. Some proposals floating around Congress would speed up the cost shift even more, by requiring even more seniors to pay higher Part B and Part D premiums. Income thresholds would be frozen after 2019, or perhaps permanently. Other proposals would increase the amount of healthcare expenses beneficiaries would have to pay out-of-pocket. The media haven’t touched those hot buttons yet, but seniors listening to the candidates might just want to know about them (I will write about them in coming days).
For now the conclusion of the Kaiser Family Foundation is a good place for reporters to start their reporting.
If the income thresholds are frozen over a longer period of time, then a growing share of the elderly and disabled people who would not be considered high income by today’s standards would face higher premiums and as the income-related premium amounts increase over time, they would consume a larger share of income.
So: Premiums for both Part B and D are rising, in order to reduce costs to Medicare, and as a result of actions by both political parties.
Who can afford these higher premiums and who can’t is an important line of inquiry, and more useful to readers than simply repeating political charges and countercharges.