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One in Four Medicare Users Would Pay Surcharges by 2035 Under GOP, Obama Plans

By John Reichard, CQ HealthBeat Editor

February 8, 2012 -- Under pending proposals by House Republicans and the White House, one in four Medicare enrollees by 2035 would be on the hook for monthly premium surcharges now paid only by beneficiaries with very high incomes, says a new study.

A Medicare enrollee today who makes as little as $47,000 a year is among the one in four Medicare beneficiaries with the highest annual incomes, notes the study by the Kaiser Family Foundation.

That income figure illustrates that the premium surcharge requirement, which under current law applies to fewer than one in 20 beneficiaries, would eventually apply to a pretty big chunk of the middle class under either proposal.

Under current law, an individual making at least $85,000 a year or a couple making at least $170,000 a year must pay much higher monthly premiums for two Medicare programs: Part B doctor care and Part D prescription drug benefits.

Those income levels won't be increased to adjust for inflation until 2019, throwing more people into the group whose premiums increase because of their "upper income."

House Republicans and President Obama have proposed to go beyond that by not adjusting the income levels for inflation until fully one quarter of the Medicare population pays the surcharges. In the case of both proposals, that will occur in 2035, the study says.

"Requiring higher-income beneficiaries to pay more might seem to be a reasonable approach to addressing fiscal concerns about Medicare," the study observes. "Yet given the relatively low incomes of most people on Medicare, significant savings from such proposals are only possible by going relatively far down the income scale to reach a sizeable share of beneficiaries," it adds. At that point, "the affordability of these additional costs could be called into question."

Last week, Democrats on the House-Senate conference committee considering an extension of payroll tax cut legislation rejected the House Republican proposal to expand the population paying the higher premiums. Republicans pointed out the Obama has proposed a similar approach. But Democrats said he did so in the context of deficit reduction, not to find pay-fors for the payroll tax measure.

The policy of charging different premium amounts based on income has sparked concern that political support for Medicare at the upper end of the income scale could erode over time.

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