Medicare Uncertainties

Amanda S. Barusch (2012): Medicare Uncertainties, Journal of Gerontological Social Work, 55:8, 677-681

PAYING FOR RETIREE HEALTH COVERAGE: PERSONAL AND ELECTORAL CONSIDERATIONS

Health coverage is on the minds of baby boomers hovering on the verge of retirement, as well as those who have already retired. We wonder what Medicare will cost and whether the program will be there to meet our needs. Here I would like to alert readers to some Medicare provisions that may be of interest, and give a brief outline of Republican and Democratic approaches to cost-reduction. Those struggling to navigate the system may find the Medicare Rights Center a valuable resource. They maintain a website (www.medicarerights.org) and a free e-newsletter.

What Will Medicare Cost?

Over the years, Medicare cost increases have been addressed through payroll tax and premium increases, some of which have been progressive, with higher rates charged to the more affluent. Part A (hospital coverage) is still free to the beneficiary, largely financed through a 2.9% tax on the wages ofcurrent workers. There is no ceiling on wages subject to the Medicare payroll tax, which is scheduled to increase to a total of 3.8% in 2013. At the same time, the tax will be applied to unearned income for high income taxpayers.

Part B is a different story. In 1967, the premium of $3 per month covered half the program’s costs (O’Sullivan, 2004). Indeed, the amount by which premiums could increase was limited by legislation and, consequentially, the proportion of costs covered by premiums steadily declined to 25% by the early 1980s. The Balanced Budget Act of 1997 called for premiums to be set at levels that cover not less than 25% of costs and, since 2007, retirees with higher incomes have paid higher Part B premiums.

A Department of Health and Human Services (2011) news release trumpeted the news that Medicare Part B premiums for 2012 would be lower than projected. Adjusted annually, the basic premium (paid by individuals with modified adjusted gross income [MAGI] of under $85,000 and couples with MAGI below $170,000) was set at $99.90 per month. This is the amount paid by 95% of beneficiaries. Those whose MAGI is higher pay more, up to a premium of $319.70 paid by individuals with MAGI above $214,000 and married couples above $428,000. Premiums under Part D (the Prescription Drug Benefit) are also structured to increase with income (Social Security Administration, 2012a).

For some, Part B premiums include a “late enrollment penalty” of 10% for each year they could have had Part B but did not enroll. Part D also has a late enrollment penalty. These penalties do not apply to retirees who have health coverage through employment, whether their own, their spouse’s or their domestic partner’s. Most people who incur the late enrollment penalty can expect to pay the increased amount for the duration of Medicare coverage.

This penalty can hit retirees hard. A woman I know moved to Canada for her husband’s job. When he passed away she returned to the United States to live with her daughter. Now in her eighties, she pays a substantial penalty for her 15-year delay in applying for Medicare.

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