Senior citizens got a modest dose of good news last week when new Medicare premiums for 2007 were announced. Premiums for Medicare Part B, which covers doctor visits and outpatient hospital care, rose just 5.6 percent for most.
That’s the smallest rate hike since 2001 – and less than half of the average 12 percent annual increase from 2001 through 2006. The experts were pleasantly surprised – premiums had been expected to rise at least 6 percent, to offset a predicted 6 percent jump in per capita health spending next year.
One reason for the lower-than-anticipated increase is that Medicare for the first time scrapped its one-price policy and began charging higher rates to more affluent seniors. The standard monthly premium for Part B will rise to $93.50 from this year’s $88.50. But individuals with an annual income of more than $80,000 or more than $160,000 for a couple will pay substantially more – $106 to $162.10, depending on income.
Shannon Benton, head of the Senior Citizens League, criticized the surcharges, predicting they would cause wealthier seniors to switch to private insurance, leaving “just the oldest and the poorest” in Medicare. But Medicare is so highly subsidized, with taxpayers picking up 75 percent of its overall costs, that even the new surcharges don’t come close to the rates wealthier seniors would have to pay for private insurance.
At the high end of the new Medicare scale, beneficiaries with individual incomes of $200,000 or more a year would pay $1,954 a year. That’s still a bargain because the average beneficiary receives $4,300 a year in benefits, according to Mark B. McClellan, head of the Centers for Medicare and Medicaid services.
Only about 1.5 million of Medicare’s 42 million recipients are expected to pay the surcharges, and McClellan predicts only 9,000 people will drop out of the program next year because of the new rates.
There is obviously a limit to which income surcharges can be applied to a program like Medicare. But it is equally obvious that the new rates don’t approach that limit. Giving wealthy seniors a smaller but still substantial subsidy so Medicare can remain affordable for low- and middle-income citizens is a sensible reform in Medicare’s rate structure.
