Medicare increase could ding some in middle class

Families could soon feel pinch from 'income related' premiums.
Associated Press
Apr 14, 2013

 

Retired city worker Sheila Pugach lives in a modest home on a quiet street in Albuquerque, N.M., and drives an 18-year-old Subaru.

Pugach doesn't see herself as upper-income by any stretch, but President Barack Obama's budget would raise her Medicare premiums and those of other comfortably retired seniors, adding to a surcharge that already costs some 2 million beneficiaries hundreds of dollars a year each.

Due to the creeping effects of inflation, 20 million Medicare beneficiaries also would end up paying higher "income related" premiums for their outpatient and prescription coverage over time.

Obama administration officials say Obama's proposal will help improve the financial stability of Medicare by reducing taxpayer subsidies for retirees who can afford to pay a bigger share of costs. Congressional Republicans agree with the president on this one, making it highly likely the idea will become law if there's a budget deal this year.

But the way Pugach sees it, she's being penalized for prudence, dinged for saving diligently.

It was the government, she says, that pushed her into a higher income bracket where she'd have to pay additional Medicare premiums.

IRS rules require people age 70-and-a-half and older to make regular minimum withdrawals from tax-deferred retirement nest eggs like 401(k)s. That was enough to nudge her over Medicare's line.

"We were good soldiers when we were young," said Pugach, who worked as a computer systems analyst. "I was afraid of not having money for retirement and I put in as much as I could. The consequence is now I have to pay about $500 a year more in Medicare premiums."

Currently only about 1 in 20 Medicare beneficiaries pays the higher income-based premiums, which start at incomes over $85,000 for individuals and $170,000 for couples. As a reference point, the median or midpoint U.S. household income is about $53,000.

Obama's budget would change Medicare's upper-income premiums in several ways. First, it would raise the monthly amounts for those currently paying.

If the proposal already were law, Pugach would be paying about $168 a month for outpatient coverage under Medicare's Part B, instead of $146.90.

Then, the plan would create five new income brackets to squeeze more revenue from the top tiers of retirees.

But its biggest impact would come through inflation.

The administration is proposing to extend a freeze on the income brackets at which seniors are liable for the higher premiums until 1 in 4 retirees has to pay. It wouldn't be the top 5 percent anymore, but the top 25 percent.

"Over time, the higher premiums will affect people who by today's standards are considered middle-income," explained Tricia Neuman, vice president for Medicare policy at the nonpartisan Kaiser Family Foundation. "At some point, it raises questions about whether (Medicare) premiums will continue to be affordable."

Required withdrawals from retirement accounts would be the trigger for some of these retirees. For others it could be taking a part-time job.

One consequence could be political problems for Medicare. A growing group of beneficiaries might come together around a shared a sense of grievance.

"That's part of the problem with the premiums — they simply act like a higher tax based on income," said David Certner, federal policy director for AARP, the seniors lobby.

"Means testing" of Medicare benefits was introduced in 2007 under President George W. Bush in the form of higher outpatient premiums for the top-earning retirees. Obama's health care law expanded the policy and also added a surcharge for prescription coverage.

The latest proposal ramps up the reach of means testing and sets up a political confrontation between AARP and liberal groups on one side and fiscal conservatives on the other. The liberals long have argued that support for Medicare will be undermined if the program starts charging more for the well-to-do. Not only are higher-income people more likely to be politically active, but they also tend to be in better health.

Fiscal conservatives say it makes no sense for government to provide the same generous subsidies to people who can afford to pay at least some of the cost themselves. As a rule, taxpayers pay for 75 percent of Medicare's outpatient and prescription benefits. Even millionaires would still get a 10 percent subsidy on their premiums under Obama's plan. Technically, both programs are voluntary.

"The government has to understand the difference between universal opportunity and universal subsidy," said David Walker, the former head of the congressional Government Accountability Office. "This is a very modest step toward changing the government subsidy associated with Medicare's two voluntary programs."

It still doesn't sit well with Pugach. She says she's been postponing remodeling work on her 58-year-old house because she's concerned about the cost. Having a convenient utility room so she doesn't have to go out to the garage to do laundry would help with her back problems.

"They think all old people are living the life of Riley," she said.

 

Comments

sorryhog

Barry and the bunch ain't done with us yet!

SamAdams

And so the penalties for success and responsibility continue... Is it any wonder there are so many out there who can't be bothered with working or saving? Why go through all the trouble when you'll just be punished for it? Besides, the long-suffering taxpayer and the "generous" Democrats will see to it your bills are paid anyway! THAT, in a nutshell, is why socialism and communism don't work. We've already got 47% (approximately) of the population who don't work because they don't HAVE to work.

As the late Margaret Thatcher said, the problem with socialism is that eventually you run out of other people's money. Yup, you do. And what happens, THEN, eh? Barry, of course, can't be bothered with the inevitable consequences. He's too busy giving new Democrats amnesty and stealing more money from the people he keeps saying he's most concerned with helping.

shucks

No more taxes!
Borrow borrow borrow!

coasterfan

Hey Sam: Republicans are only concerned about 'inevitable consequences' when they aren't in the White House. You were all curiously silent when Bush put two unnecessary wars on the country's credit card, while simultaneously cutting taxes/revenue. The Bush plan was spend, spend, spend, but don't pay for anything, and it turned the budget SURPLUS that he inherited into a multi-trillion dollar deficit. Your party doesn't have a leg to stand on, when the discussion is on economic policy. You are still actings as if your point of view is the majority viewpoint in America, which it most decidedly is NOT.

8ballinthesidepocket

We got rid of Bush and next on the list are all the liberals that support tax and spend. The a$$hole lied to us and continues to lie to us.

8ballinthesidepocket

Gfegt

SamAdams

If you think I was "curiously silent" when Bush was in office, you must have been wearing ear plugs...

My criticism of Barack Obama does NOT mean that all Democrats are evil or that all Republicans are paragons of virtue. What it means is that Barack Obama and too many Democrats are bound and determined to take the country down. Unfortunately, the one thing you're right about is that the Bush administration wasn't that much better, and that most Republicans currently in Congress haven't improved.

looking around

@ Sam and Sorryhog I guess you two missed the part that say's this idea is republican backed and has their support.....

deertracker

Of course they did!

KURTje

Agree looking. Not to mention those on a "fixed" income by & large knew better wages & benefits compared to those 55 & under. What just happened in Ohio the other day regarding Medicaid & Kasich?

mikel

looking around, put the burden where it belongs: "...Obama administration officials say Obama's proposal.." this is clearly pushed by obama and his croonies.

with the smallest workforce, 63.3%, since the 70's it is no wonder that the gov is asking more from those receiving benefits. maybe the addition of 9+ million on disablility since 2009 (obama's watch) has something to do with these programs being underfunded.

bobshumway92

No one making under $250k a year will see any form of tax increase. Barack Hussein Obama. Liar in Chief.

deertracker

So where's the tax increase?

SamAdams

One word: Obamacare.

coasterfan

Bob: It's too bad at GOP leadership didn't allow Obama's plan to come to fruition. He instead had to alter his plan and compromise, which would be the reason it's different than his original. Understand?

arnmcrmn

Just more crap out of this Liar n Chief. Told you guys over 2 years ago....he's coming after the middle class. There are not enough rich people to support his spending and new programs.

coasterfan

LOL. During Obama's first four years in office, he increased spending an average of 1.8% per year, compared with an average yearly spending increase of 8% during the Bush years. Of course, Obama's spending has dropped even more due to the sequester, yet some people still are blithering on and on about Obama's spending.

goofus

If he would quit spending money on stupid things rather than necessities!!

S w Rand 2016

Coasterfan, even if those numbers were correct, it would still mean that Obama is increasing Bush's spending by approximately 1.8% per year. In real Dollars, that is huge.
You can't say Bush's spending was a bad thing and then turn around and say that Obama is doing better by increasing Bush's spending, no matter how low of a percent you claim the increase is.

In a similar fashion, you pretend that the sequester means Obama's spending has dropped. The spending he did is already done. It can't drop. As to the future spending which the sequester affects, it merely reduces the growth of spending and it is only by a few percent.
Only in Washington (and the minds of people such as yourself, possibly) can a decrease in the increase of future spending be considered a significant achievement. In reality, it is merely saying "I was gonna use your checkbook to write $10,000,000,000,000 worth of bad checks, but now I promise to only write $9,700,000,000,000 worth of bad checks."

The Big Dog's back

She could always buy private insurance. Why have that "evil" Medicare in the 1st place. Come on lady, buck up.

grandmasgirl

If she is anything like me, then when she became eligible for Medicare, she probably purchased a Medicare supplement. I know that between my Medicare premium (unlike MEDICAID, Medicare is NOT free), my Medicare supplement and my drug plan, I pay $350 a month for my insurance. This doesn't include co-pays, deductibles, etc. Maybe that doesn't seem like much to you, but that is a big chunk out of my retirement benefits.

samiam

Obama is the great equalizer...he wants everyone to be poor!

deertracker

How ridiculous!!!!!!!!!!!!!!!

bullydogs1971

I saw a man holding a sign the other day with three choices and a box to check your choice......one choice was REP, the next DEM, the last one PI$$ OFF.....i chose the last one!

mikel

there was an interesting article a week or so ago by the ap. england, not unlike any other country is going broke in a hurry and one of the segments that is draining money faster than any other area is gov't paid disability.

apparently, in january of this year i believe, the british gov't told all of those receiving disability benefits that they had 6 mos to get re-evaluated for their disability or lose it. as of press time 45% of those on disability dropped from the rolls. i say hey, u.s. gov't, let's do the same! instead of adding 9 million to the rolls in the last few years maybe we can cut some of those scammers!

grandmasgirl

Amen.

coasterfan

Republicans always want smaller government, and unfortunately, that means less regulation and fewer government workers to enforce those rules. You can't have it both ways.

If you want things like better oversight to prevent Medicare scamming, police protection, fire protection, FEMA, maintaining roads, bridges and our power grid, safe air, safe water and a safe food supply, it's our government that takes care of those things. If we want our country to have them, we have to pay for them. it's a pretty simple concept, but it requires acceptance of doing things for the common good, which, I know, is anathema to the Republican cause.

shucks

sooo true

starryeyes83

By the same token let's cut some of the retirement bennies for people who keep getting remarried after divorced or widowed or say make a choice between military pension bennies or regular retirement ( in other words only ONE retirement plan not three or four different ones that I know of people who are getting) ... seems to me there's some scamming there , too.

How do you think that would go over?

Point made.

mikel

so not true coaster. the gov't already collects massive amounts of monies for these items. however, they do not spend those dollars on what they were collected for. we are currently taxed on fuel, utilities, ssi etc. by robbing these funds for wasteful items they rob the ability to create, build and enforce.

8ballinthesidepocket

Somebody has to pay for the 25 million illegals and 40 million deadbeats added to the medical system by these liberals.

I

They can no longer be referred to as illegals: http://youtu.be/BtZNY1lP3Lk

shucks

.

starryeyes83

Not to mention the fact if we weren't spending approx. $ 630 Billion** a year ( adjust for inflation )... there would be alot of $$ to put into these other programs. And the seniors and disabled who truly need it would not be getting the shaft with out a lube job , first.

** latest figure I've heard.

KURTje

Illegals? Geez. Who wanted & got cheap labour, i.e. migrant help? Who paid for it? 1rst question GOP/Agri buSINess. 2nd question US. So it is US against them. The middle class is being hurt some. The working class got it a few years back. (Forgot about border states & construction workers)