Expert's View

Last week I talked about the Congressional Budget Office recommendation to increase the age at which you become eligible for Medicare from 65 to 67. This time I want to highlight its recommendation to increase the basic premium for Medicare Part B.


What I didn’t realize until I read what CBO had to say was that when the program began in 1966, the premium was intended to finance 50 percent of the Part B cost, with the rest being funded by general revenues. Since then, legislation has reduced the amount enrollees pay. The Balanced Budget Act of 1997 set that amount at 25 percent of the actual cost. Quite a drop.

If you are enrolled in Part B, you know that the premiums have been going up each year. From $96.40 a month in 2009, they have risen to $110.50 in 2010. However, those of you who are receiving a Social Security benefit have recently been shielded from the increase because of the "hold harmless" provision in the Social Security Act. It prevents you from having your Social Security monthly benefit decreased if the increase in the premium amount exceeds the Social Security cost-of-living adjustment. This doesn’t mean that you won’t eventually have to pay the higher premiums, only that they will go up only to the extent that you once again begin receiving a COLA.

What CBO proposes is that the percent of cost born by enrollees be increased from 25 to 35 percent. Even it realizes that recommending an increase to 50 percent would be a non-starter with enrollees and the Congress. In short, they recommend that the percentage rise over a five-year period beginning in 2012, while leaving the hold-harmless provision in place. If this recommendation is approved, it "would result in estimated savings of about $71 billion over the 2012-2016 period and about $241 billion over the 2012-2021 period."

Being honest about the consequences of such a change, CBO points out that it would not only reduce disposable income for many Part B enrollees but probably would lead to a decline in the number of people who enroll in it. Further, it could increase the cost to states, which would have to pay higher premiums for those citizens eligible for both Medicare and Medicaid.