Proposed Medicare premium hike would weaken Medicare

In late March, the U.S. House of Representatives passed a bill with bi-partisan support that would again raise Medicare premiums for people with Medicare with higher incomes. Today, the Senate passed the legislation, and President Obama has said he will sign it.

Through this bill, H.R. 2, Congress does some good. It fixes the payment formula for doctors who treat Medicare patients, ensuring they are paid adequately; it also extends the Children’s Health Insurance Program. But, hiking Medicare premiums, even a small amount for wealthier individuals, as a way to cover these costs weakens Medicare for everyone.

Driving up insurance costs for people with Medicare with higher incomes is bad policy. Insurers don’t charge wealthier people higher premiums for the same product and neither should Medicare. In fact, until 2003, during the Bush administration, everyone with Medicare paid the same premium. Higher premiums for higher income earners helps position Medicare as a welfare program, makes it easier for Congress to increase premiums on middle class individuals with Medicare next-time it seeks money, and paves the way for the privatization of Medicare.

The overwhelming majority of people with Medicare already pay a $105 monthly premium for Medicare Part B, which covers medical and outpatient services.  That amount represents 25 percent of Medicare costs,  (Medicare Part A is free for anyone who has worked forty quarters and made payroll contributions to Medicare.)  But, today, six percent of people with Medicare–2.9 million people with incomes over $85,000 and couples with incomes over $170,000–are required to pay as much as 80 percent of Medicare’s costs. If H.R. 2 becomes law, it will raise Part B and Part D premiums for some wealthier individuals–those with incomes between $133,500 and $214,000–about another $1,000 a year ($82 a month) beginning in 2018.

Medicare is a social insurance program and not a welfare program. And wealthier Americans already make larger payroll contributions into Medicare.  While most people affected by the proposed premium increase will not feel its effect, there are better ways to generate revenue to support Medicare, such as through a more progressive tax system or a financial transaction tax or through negotiated drug prices.

In short:

1. The more that wealthier individuals are asked to pay for Medicare, the more Congress positions it as a welfare program and erodes support for Medicare. It opens the door further for Congress to charge middle-income Americans with Medicare higher premiums. Medicare was created as a social insurance program that treats everyone equally, regardless of income, geography, health status.  This helps ensure broad support from people across the income spectrum.
2. A more progressive tax system that affects everyone is the way to ensure wealthy Americans contribute their fair share to society, while keeping social insurance programs strong. For sure, people with Medicare earning $133,500 and more yearly are generally in good financial shape.  Certainly they are relative to the other 94 percent of the Medicare population. But, who knows what’s in store next on the Medicare premium front. Turning Medicare into more of a welfare program by imposing additional financial burdens on wealthier people is a poor policy choice.

The House bill also prohibits Medicare supplemental insurers from selling insurance that covers the Medicare Part B deductible. That’s another poor policy choice.

To be clear, the amount of the additional Medicare premium increase in H.R. 2 is just under $1000 a year.  The combined Medicare Part B and D premiums would increase $82 a month beginning in 2018.  And, this increase would only apply to individuals with incomes between $133,500 and $214,000 and couples with incomes from $267,000 to $428,000.  But, it could be the tip of the iceberg.