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New Medicare law will make some wealthier individuals pay more

Written by Steve Findlay

A new Medicare law—the Medicare and CHIP Reauthorization Act, or MACRA—went on the books April 15. It makes some pretty big changes to the program. Previous Just Care posts took issue with some of its provisions. See here and here. If you are in your 60s or enrolled in Medicare now, the big news is this: beginning in 2018, the new Medicare law will make some wealthier individuals pay more–higher premiums for both Part B (physician and outpatient services) and Part D (prescription drugs). They already do, but the amount is increased. The specifics:

  • If your annual income is below $133,500 as an individual or $267,000 as a couple, your Part B and D premiums will not be ratcheted up. That encompasses more than 90% of people on Medicare. You’ll still be subject to the normal annual premium uptick, which will be calculated according to existing law and not the new law. You can see current Part B and Part D premium details here and here. The Part B monthly premium in 2015 is $104.90, or $1,258.80 per year. The vast majority of people pay that.
  • If your income is between $133,500 and $214,000 as an individual or $267,000 and $428,000 as a couple, you’ll pay a higher premium than lower income people. You already do, but the amount is increased starting in 2018. The exact amount will be pegged each year to program costs, in two tiers. For example, couples with incomes between $267,000 and $320,000 will have to pay a premium that reflects meeting 65% of program costs, up from 50%. Couples with incomes above $320,000 will have to pay a premium that covers $80% of program costs, up from 75%. People in lower income brackets pay a premium that covers 25% of program costs.
  • If your income is above $214,000 as an individual or $428,000 as a couple, your premiums will not be ratcheted up higher than they already are.

That’s not , we know, but worth understanding, especially if you have Medicare and are in this higher income bracket. The bottom line is that wealthier individuals will have to pay an additional $1,000 or so a year in Part B premiums under the new law.

  • The new law makes permanent a Medicare program that pays the Part B premium for people with low-incomes, those with incomes between 120% and 135% of the federal poverty level, or currently about $14,000 to $15,900 a year. (It also makes permanent a program that allows low-income families to maintain Medicaid coverage for up to one year as they transition from welfare to work.)
  • Starting in 2020, Medigap policies would no longer be allowed to provide what’s called “first dollar coverage.” That’s when the policy covers all of the Part B deductible as well as coinsurance. Only a few types of Medigap policies provide such coverage now. The 2015 Part B deductible is $147. The rationale for this change is that first dollar coverage incentivizes people to seek unneeded care since they aren’t on the hook for the tab. Again, see our previous post on this new provision here.

The law changes the way Medicare pays doctors starting in 2019. The change is significant but it’s way too early to speculate on its impact. Medicare has for several years been slowly transforming doctor payment, shifting from a system that pays them a fee for every service no matter what the outcome to one that holds doctors more accountable for the quality of care they deliver. For a discussion of that provision, see here.  The Kaiser Health News has a good Q&A on the law.

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  • Easiest way is to find a local independent agent in your town to shop it for you. Plan D makes the most sense for sonmeoe on a budget and usually Mutual of Omaha will be one of the lowest but have your agent check because they are all priced by county.United Healthcare (sold by AARP) is NOT usually the best choice because it is the exact same coverage but is usually priced higher because they have to pay for all of AARP’s junk mail and TV ads.

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