Medicare
Plan Lifts Premiums for the Affluent
By Robert Pear, the New York Times
October 6, 2003
With unexpected support from some Democrats, Republican negotiators
from the House and the Senate say they are seriously considering a change in
Medicare that would require elderly people with high incomes to pay higher
premiums than other beneficiaries.
The discussions come as the negotiators step up their efforts to reach
agreement by Oct. 17 on a bill to overhaul Medicare and add prescription
drug benefits.
The proposal to link premiums to income raises a philosophical and
political question: Should wealthy people pay more for Medicare?
Republicans like Senator Don Nickles of
Oklahoma
say such a requirement is a sensible, progressive way to slow the growth of
federal Medicare spending. The Senate majority leader, Bill Frist of
Tennessee
, said the Medicare negotiators had "a mandate" to charge affluent
people somewhat more.
In the past, Democrats have vehemently opposed the idea. But some of the
social policy experts most respected by liberal Democrats now say they are
receptive to it, as a way to avert cuts in Medicare and other domestic
programs. Pressure for such cuts will increase, they say, as budget deficits
grow and baby boomers cash in their claims to Medicare and Social Security.
Most of the 40 million Medicare beneficiaries now pay the same premium,
$58.70 a month, or about $704 a year, for doctors' services and other
outpatient care.
Under one proposal being discussed by House and Senate negotiators,
premiums would rise gradually with a beneficiary's income. The change would
affect only people with annual incomes above a certain level, perhaps
$75,000 or $100,000. Individuals with incomes exceeding $200,000 could see
their premiums triple, to about $2,100 a year.
AARP, the lobbying group for older Americans; labor unions like the
United Automobile Workers; and some liberal Democrats, including Senator
Edward M. Kennedy of Massachusetts, say levying an extra charge on affluent
beneficiaries would undermine the universal nature of Medicare. Such a
change, they say, would be a dangerous first step in turning Medicare from a
universal social insurance program into a welfare program.
But Robert M. Ball, who worked at the Social Security Administration for
three decades and was commissioner from 1962 to 1973, said: "I don't
see an objection to having an income-related premium. I am opposed to
varying Medicare benefits according to the income of the recipient, but I
find it completely acceptable to have people with higher incomes pay more
for those benefits."
Robert Greenstein, executive director of the Center on Budget and Policy
Priorities, a liberal-leaning research and advocacy group, and Robert D.
Reischauer, president of the Urban Institute, a research organization, said
they favored linking Medicare premiums to income.
"This is one of the most reasonable, most justifiable, least painful
changes you could make," Mr. Greenstein said. "It does not do
violence to Medicare as a program that provides the same coverage and
benefits to everyone."
Mr. Reischauer, a former director of the Congressional Budget Office,
said that "asking upper-income elderly people to pay a little
more" was fairer than some of the alternatives: raising payroll taxes,
increasing Medicare premiums for all beneficiaries and cutting benefits.
The Senate bill does not include any kind of so-called means test, though
the Senate did show support for the idea in a test vote on a proposal to
increase the basic Medicare premium for affluent elderly people.
"High-income beneficiaries can afford to pay a larger share of
Medicare's costs," said Senator Dianne Feinstein, Democrat of
California.
Mrs. Feinstein, who offered the proposal, said it would affect about 2
percent of beneficiaries: individuals with incomes exceeding $100,000 a year
and couples with incomes of more than $200,000.
The House endorsed a more complicated plan that would require affluent
beneficiaries to spend more of their own money before they could get
Medicare coverage of catastrophic drug costs.
"I do not believe that someone with a $200,000 income living in a
gated community should have exactly the same subsidy as someone struggling
along on $25,000 or $30,000 of income," said Representative Nancy L.
Johnson, Republican of Connecticut, who is the chairwoman of the
House Ways
and Means Committee's Subcommittee on Health.
In 1997, the Senate voted, 70 to 30, to charge higher premiums to
affluent beneficiaries. The proposal did not become law but won support from
21 Democratic senators, including John B. Breaux of
Louisiana
, Bob Graham of
Florida
and Max Baucus of
Montana
. Mr. Breaux and Mr. Baucus are on the conference committee working on the
Medicare bill.
Republicans say it is strange that Democrats who want to impose higher
income taxes on millionaires refuse to impose higher Medicare premiums on
wealthy retirees.
Senator Kennedy said he feared that an increase in premiums would prompt
high-income people to leave Medicare, raising costs for those who remain.
Some Democrats also make an argument based on social solidarity: If affluent
people have to pay more, their political support for the Medicare program
will erode.
Mr. Reischauer said he doubted that many affluent people would drop out.
Even if premiums doubled or tripled, he said, "Medicare would represent
a very good deal."
Higher-income workers already pay more into Medicare than other people.
The Medicare payroll tax is levied at the same percentage rate, regardless
of a person's income, and there is no ceiling on the amount of earnings
subject to the tax.
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2002 Global Action on Aging
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