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Shhh—They're Telling the Rich They Have to Pay More for Medicare

By John Reichard, CQ HealthBeat Editor

Nov. 27, 2006 – The last time affluent Medicare beneficiaries were singled out to pay higher premiums for Medicare benefits, the howl of public protest was so strong that Congress quickly repealed the higher charges. Now, 17 years later, notices are once again hitting the mailboxes of affluent elderly Americans telling them they will have to pay more for Medicare—and the Social Security Administration (SSA) is bracing for thousands of calls and visits protesting the higher charges.

While no one is predicting a backlash of the magnitude that led to the November 1989 repeal of the Medicare Catastrophic Coverage Act of 1988 (PL 100-360) —which Congress passed in July of that year to add a drug benefit to Medicare—analysts say protests caused by the higher premiums will be made worse because Social Security officials won't be able to handle the added workload. Key lawmakers also are crossing their fingers that Social Security will be able to accurately calculate the higher premiums given tight deadlines and a tight operating budget facing the agency.

At issue is a provision of the Medicare overhaul law (PL 108-173) that charges beneficiaries higher monthly premiums starting Jan. 1 for Part B of Medicare if their annual incomes exceed $80,000 in the case of individuals and $160,000 in the case of married couples.

Lawmakers added the provision in part to help pay for the new Part D prescription drug benefit, but it's also widely viewed as a test of how feasible it will be politically to address Medicare's long-term financial woes by making the rich pay more for the program. If the squawks aren't too loud, "income-relating" of premiums eventually could see wider use in the program.

SSA spokesman Mark Lassiter said Monday that by the end of this week or soon thereafter, a total of 1.6 million of the 40.7 million Medicare beneficiaries enrolled in Part B will have received the notices. Part B covers various services and products provided to beneficiaries who aren't admitted as hospital inpatients.

While there is no flood of calls yet, notices "are just starting to hit people's mailboxes," Lassiter said. Overall, SSA estimates that the higher charges will prompt 337,000 "inquiries," 35,000 requests to recalculate incomes on which the higher charges are based, and 141,000 requests to change premium charges because of a "major life-changing event" that affects income, such as divorce, death of a spouse, or retirement.

Federal agencies have issued a few press releases about the higher premiums and the "Medicare and You" handbook sent to beneficiaries earlier this fall also notifies seniors of the change. But it is likely that this week's notice will be the wake-up call for hundreds of thousands of beneficiaries. And if it doesn't dawn on them this week, it's less likely to escape their attention in January when the higher charges will be subtracted from Social Security checks.

The overhaul law eases the bite by phasing it in over a three-year period. While Part B premiums will rise from $88.50 this year to $93.50 next year for most beneficiaries, the affluent will have to pay between $105.80 and $130.90 per month in 2007 depending on how well-off they are. By 2009, the numbers get much bigger, with individuals making between $80,001 and $100,000 a year paying $130.90 per month and those making more than $200,000 paying $299.20. The estimates are based on 2007 dollars, and the actual premiums charged in 2008 and 2009 are likely to be somewhat higher.

A new Government Accountability Office study notes that SSA had just one month between the time it received income data from the Internal Revenue Service and the mailing of the notices to calculate premiums. The chairman and the chairman-to-be of the Senate Finance Committee say that may prove to be too little time to get the numbers right.

Chairman Charles E. Grassley, R-Iowa, and ranking member Max Baucus, D-Mont., emphasized the importance of accurate calculations in a Nov. 17 statement. Beneficiaries will have 60 days within the time they receive the notices to file an appeal if they think the numbers are wrong. "This process ought to be seamless given that we passed the law three years ago," Baucus said. However, beneficiaries who have a "life-changing event" or who have amended tax returns may have more time to appeal.

Lassiter said Social Security will be able to handle the added visits and calls by shifting workloads among offices. That's because some offices in less affluent areas are likely to get fewer protests. But the GAO analysis said SSA staff shortages and a current hiring freeze could make it difficult to respond to increased volume. If beneficiaries are kept on hold waiting to question SSA's math, the volume of protest faced by congressional offices may be that much higher.

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