New EBRI Research: Massive Part B Premium Increase Seen by 2011 for Highest Income Medicare Beneficiaries

5/19/2004

From: Paul Fronstin, 202-775-6352 or fronstin@ebri.org, or Jim Jaffe, 202-775-6353 or jaffe@ebri.org, both of the Employee Benefit Research Institute

WASHINGTON, May 19 -- High income Medicare beneficiaries who now pay premiums of less than $800 annually for optional Part B outpatient coverage will be paying approximately $3000 more for the same coverage by 2011, according to a new analysis by the Employee Benefit Research Institute. But most Medicare beneficiaries will see their annual premiums increase by only about $400. These changes are mandated by the Prescription Drug and Medicare Improvement Act of 2003, which became law late last year.

Historically, beneficiaries who opt for Part B pay a premium equal to 25 percent of the program's cost. But the new law requires seniors with incomes exceeding $80,000 to pay a greater percentage of the cost. For those in the top group, where income exceeds $200,000 annually, the Federal subsidy, paid out of general revenues, will decline from 75 percent to 20 percent.

At the start, only about 3 percent of seniors will face the higher premiums, but this percentage is projected to double by 2013.

Because the premium figures are set annually based on the program's projected costs, these numbers are approximations based on the formula in the law. They are presented in the May 2004 issue of EBRI Notes, which concludes that this development, when coupled with the decline in employment-based retiree health insurance means that many seniors will be asked for pay more for health care services than they currently anticipate.

"Despite the addition of a Medicare drug benefit last year, it appears that the amounts needed by seniors to pay for needed medical care will continue to rise," said EBRI President and CEO Dallas Salisbury.