WASHINGTON – When new income-based premiums for Medicare’s Part B program go into effect next month, some seniors will get an unwelcome surprise: Their monthly costs will be going up considerably more than expected because of the government’s method of counting their income.
In addition to income from investments, pensions and wages, seniors will find that big but unusual windfalls – from house sales, for instance, or from taking cash from an individual retirement account – will also be included in government calculations.
As a result, an advocacy group for seniors says, tens of thousands of people will be counted as wealthy even though their continuing yearly income is modest. Some will be paying as much as $800 more a year for Part B coverage because they are deemed to be “higher income beneficiaries.” This will be on top of the $93.50 a month standard premium that all recipients will pay.
“We are concerned that our members are just now finding out that the government is suddenly increasing seniors’ Part B premiums without adequate warning,” Shannon Benton, executive director of the Senior Citizens League, said in a statement.
Mark Hinkle, a spokesman for the Social Security Administration, said that a small number of people will indeed have to pay more for their 2007 premiums because of large 2005 capital gains reported on their income tax returns. But he said that the premiums would go down in future years once the capital gains are no longer part of a recipient’s tax return.
Congress, he said, listed a number of “life-changing events,” such as divorce, death of a spouse or loss of a job, that could reduce a beneficiary’s premium. But capital gains from the sale of a house or an IRA payout are not on the list, he said, and so are treated no differently than wages when calculating the premium.
On its Web site, Social Security details how Part B participants can question or challenge their new premium assessments.
Provisions for “means testing” the Medicare Part B program, starting in 2007, were included in the Medicare Prescription Drug Improvement and Modernization Act of 2003.
The actual determination of a beneficiary’s income, and how much people will have to pay in Part B premiums for 2007, is made by the Social Security Administration and based on 2005 income tax returns. Letters from Social Security have been going out to Medicare beneficiaries nationwide this month telling them whether they have to pay additional Part B premiums because of their income.
Medicare’s Part B covers doctor and outpatient hospital bills.