One last push to stop Medicare premium increases

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[September 11, 2015]  By Mark Miller

CHICAGO (Reuters) - Should 30 percent of Medicare beneficiaries shoulder a 52 percent premium hike next year while the other 70 percent pay no more at all? Advocates for seniors do not think so, and they are making a push to convince Congress to stop it from happening.

The Medicare population vulnerable to shouldering the larger premium includes some federal and state government employees, people who sign up for Medicare for the first time next year, low-income seniors whose premiums are paid by state Medicaid plans and high-income seniors who already pay premium surcharges.

For these 16.5 million enrollees facing the stiff increase, monthly premiums would rise to $159.30 from $104.90, according to the recent annual report of the Medicare trustees (http://reut.rs/1MPkYeN).

Meanwhile, 36 million Medicare Part B enrollees would have their premiums hold steady at $104.90 because increases are tied to Social Security cost-of-living adjustments as part of a "hold harmless provision" in the Social Security Act. Because no COLA is expected next year due to extraordinarily low inflation this year, the Part B premium will stay flat.

Some costs will go up for almost everyone, however, as trustees forecast a big increase in the Medicare Part B deductible, to $223 from $147, with the exception of those who have first-dollar Medigap supplemental policies and Medicare Advantage plan enrollees.

WHAT CAN BE DONE

Advocates for the 30 percent are swinging into action, trying to convince Congress to pass a one-time fix that would hold off on cost of living increases for everyone. Legislation that extended the hold harmless provision to those not covered by it passed the House of Representatives when a similar situation occurred in 2009, but never received a vote in the Senate.

This time, the fix is being pushed by a broad coalition of advocates and organizations representing federal and state government workers. No official figures are available, but a back-of-the-envelope calculation suggests a fix would cost the federal government $10 billion.

"It's not an ideal situation from anyone's perspective," says Juliette Cubanski, associate director of the Program on Medicare Policy at the Kaiser Family Foundation. "People on Social Security would much rather have a COLA, and the Medicare actuaries would much rather spread around the cost increases evenly."

The 2016 premiums are not locked in until October, so there is still time to change course. The Part B premium is based on the program's estimate of how much they need to run the program, plus a cushion for unexpected costs, Cubanski explains. "Medicare could opt for a smaller reserve, which could bring the premium down a bit."

Politicians are not likely to ride to the rescue of well-off seniors, who will bear some of this expected price increase. But half of Medicare beneficiaries have an income of $24,000 or less, according to Kaiser. Price increases will hit them hardest.
 

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Among the middle-income seniors likely to be affected are federal retirees covered by the Civil Service Retirement System - the government's legacy defined benefit pension system.

These retirees did not participate in Social Security during their time in the federal workforce (federal workers hired since 1987 have participated in the newer defined benefit Federal Employees Retirement System, and they receive Social Security.)

This also applies to state government employees, most of whom participate in defined-benefit pension plans and are not covered by Social Security during their tenure as state employees.

Another big area of worry: low-income "dual-eligible" seniors who receive Social Security and also participate in both Medicare and state-run Medicaid programs.

Although this group is not covered by the "hold harmless" provision, states pick up the tab for the higher cost, putting additional pressure on already-stressed state Medicaid budgets.

"We're very concerned about state Medicaid budgets, and how they would handle the increase," says Andrew Scholnick, senior legislative representative at AARP.

Although Congress has a busy fall schedule, lawmakers are showing interest in taking action to mitigate the impact. "I think it's is going to come to the forefront a bit more now," says Scholnick.

 



But he doubts Congress will act before October, leaving the door open to a last minute fix before year-end.

(Editing by Beth Pinsker and Alan Crosby)

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