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Raising Medicare Premiums for Higher-Income Beneficiaries: Assessing the Implications

Issue Brief
  1. For a summary of several recent proposals, see Kaiser Family Foundation, “Medicare and the Federal Budget: Comparison of Medicare Provisions in Recent Federal Debt and Deficit Reduction Proposals,” January 2014.

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  2. Bipartisan Policy Center, “A Bipartisan Rx for Patient-Centered Care and System-Wide Cost Containment,” April 2013, http://bipartisanpolicy.org/sites/default/files/BPC%20Cost%20Containment%20Report.pdf.

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  3. Center for American Progress, “The Senior Protection Plan,” November 2012, http://www.americanprogress.org/wp-content/uploads/2012/11/SeniorProtectionPlan-3.pdf.

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  4. The Moment of Truth Project, “A Bipartisan Path Forward to Securing America’s Future,” April 2013, http://www.momentoftruthproject.org/sites/default/files/Full%20Plan%20of%20Securing%20America%27s%20Future.pdf.

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  5. Earlier versions of this proposal were included in the Obama Administration’s broader set of recommendations to the Joint Select Committee on Deficit Reduction, and as part of the House Republican’s proposed legislation to extend the Social Security payroll tax reduction for 2012 (along with other provisions).  See Office of Management and Budget, “Living Within Our Means and Investing in the Future: The President’s Plan for Economic Growth and Deficit Reduction,” September 19, 2011; and H.R. 3630, “Middle Class Tax Relief and Job Creation Act of 2011,” as introduced on December 9, 2011  http://rules.house.gov/Media/file/PDF_112_1/legislativetext/HR_1209.pdf.

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  6. Congressional Budget Office, “Estimated Effects on Direct Spending and Revenues for Health Care Programs of Proposals in the President's 2014 Budget,” May 2013, http://www.cbo.gov/sites/default/files/cbofiles/attachments/44247_APB_HealthCarePrograms.pdf. Separately, CBO has estimated the cost of freezing all of the income thresholds for income-related premiums through 2023, extending the current freeze by four years.  CBO estimates that this option would reduce net Medicare spending by $20 billion between 2020 and 2023, and the share of enrollees paying income-related premiums would rise from 10 percent in 2019 to 13 percent in 2023; see Congressional Budget Office, http://www.cbo.gov/sites/default/files/cbofiles/attachments/44715-OptionsForReducingDeficit-2_1.pdf

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  7. Congressional Budget Office, “Estimate of the Effects of Medicare, Medicaid, and Other Mandatory Health Provisions Included in the President's Budget Request for Fiscal Year 2013 - March 2012 Baseline,” March 2012,  http://www.cbo.gov/sites/default/files/cbofiles/attachments/FY2013ReestimateofthePresidentsBudget-Health.pdf

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  8. For beneficiaries with low incomes, Medicaid pays the Part B premium on their behalf.

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  9. Urban Institute tabulations from DYNASIM for the Kaiser Family Foundation. See also: Gretchen Jacobson, Jennifer Huang, Patricia Neuman, and Karen E. Smith, “Income and Assets of Medicare Beneficiaries, 2013-2030,” Kaiser Family Foundation, January 2014.

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  10. The Patient Protection and Affordable Care Act (P.L. 111-148), as modified by the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152).

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  11. The Congressional Budget Office estimated this provision in the ACA would generate savings to the federal government of $25.0 billion from 2010 to 2019.

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  12. Estimates of Part B enrollees paying income-related premiums under current law are from the Urban Institute analysis of DYNASIM for the Kaiser Family Foundation.  Estimates from DYNASIM are very similar to estimates from the Centers for Medicare & Medicaid Services Office of the Actuary (December 2010).

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  13. Although more than 5 percent of Medicare beneficiaries are estimated to have incomes greater than $85,000 in 2013 (according to Urban Institute analysis of DYNASIM for the Kaiser Family Foundation), not all Medicare beneficiaries are enrolled in Part B and thus not all higher-income people on Medicare are paying the income-related premiums.  This is partly due to the fact that people ages 65 and older who are currently working and have group health insurance through an employer can opt out of Part B until they stop working or lose access to employment-based coverage.  This group of active workers may be comprised disproportionately of higher-income people ages 65 and older who would otherwise be enrolled in Medicare Part B and paying the higher-income premiums.

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  14. 2013 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.

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  15. Estimates are based on the 2013 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.

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  16. With the exception of beneficiaries receiving low-income subsidies, who pay no or low premiums, with subsidy levels set on a sliding scale.

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  17. The Congressional Budget Office estimated this provision in the ACA would generate savings to the federal government of $10.7 billion from 2010 to 2019.

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  18. Centers for Medicare & Medicaid Services, “Annual Release of Part D National Average Bid Amount and other Part C & D Bid Related Information,” July 30, 2013.

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  19. Jack Hoadley, Juliette Cubanski, Elizabeth Hargrave, and Laura Summer, “Medicare Part D: A First Look at Part D Plan Offerings in 2014,” Kaiser Family Foundation, November 2013, http://www.kff.org/medicare/issue-brief/medicare-part-d-a-first-look-at-plan-offerings-in-2014/.

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  20. If the benefit payment is insufficient to allow the Part D-IRMAA withholding, or an individual is not receiving benefit payments from SSA, RRB, or OPM, the Part D-IRMAA will be collected directly from these beneficiaries.

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  21. Estimates of Part D enrollees paying income-related premiums under current law are from the Urban Institute analysis of DYNASIM for the Kaiser Family Foundation.  Estimates from DYNASIM are very similar to estimates from the Centers for Medicare & Medicaid Services Office of the Actuary (December 2010).

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  22. Excluding those who receive the Retiree Drug Subsidy (RDS).

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  23. Centers for Medicare & Medicaid Services, “Annual Release of Part D National Average Bid Amount and other Part C & D Bid Related Information,” July 30, 2013.

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  24. 2013 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.

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  25. OACT projects that the number of beneficiaries with the RDS will decline over time.

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  26. Kaiser Family Foundation analysis of the CMS Medicare Current Beneficiary Survey 2006 Cost and Use file.

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Tables
  1. Bipartisan Policy Center, “A Bipartisan Rx for Patient-Centered Care and System-Wide Cost Containment,” April 2013, http://bipartisanpolicy.org/sites/default/files/BPC%20Cost%20Containment%20Report.pdf

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  2. Center for American Progress, “The Senior Protection Plan,” November 2012, http://www.americanprogress.org/wp-content/uploads/2012/11/SeniorProtectionPlan-3.pdf

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  3. Moment of Truth Project, “A Bipartisan Path Forward to Securing America’s Future,” April 2013, http://www.momentoftruthproject.org/sites/default/files/Full%20Plan%20of%20Securing%20America%27s%20Future.pdf

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  4. U.S. Office of Management and Budget, Budget of the United States Government, Fiscal Year 2013, http://www.gpo.gov/fdsys/pkg/BUDGET-2013-BUD/pdf/BUDGET-2013-BUD.pdf

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  5. Budget of the United States Government, Fiscal Year 2014, http://www.whitehouse.gov/sites/default/files/omb/budget/fy2014/assets/budget.pdf

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ISSUE BRIEF