December 13, 2011 in Nation/World

Can’t raise taxes? Hike Medicare premiums instead

Associated Press

WASHINGTON — Raising taxes on millionaires may be a non-starter for Republicans, but they seem to have no problem hiking Medicare premiums for retirees making a lot less.

The House is expected to vote today on a year-end economic package that includes a provision raising premiums for “high-income” Medicare beneficiaries, now defined as those making $85,000 and above for individuals, or $170,000 for families.

Some would pay as much as several hundred dollars a month additional for Medicare outpatient and prescription coverage. Millions who don’t consider themselves wealthy would also end up paying more.

Just the top 5 percent of Medicare recipients currently pay higher premiums, a change that took effect a few years ago. The new GOP proposal would expand that over time to include the highest-earning one-fourth of seniors.

On Monday the White House was mum on the Republican Medicare proposal, while AARP said it’s tantamount to a new tax. In the Democratic-led Senate, there’s not much enthusiasm.

The plan is modeled on a proposal that President Barack Obama submitted earlier this year to congressional debt negotiators, when he was seeking a “big deal” to cut federal deficits. Continuing pressure to curb spending means the proposal eventually could become the law of the land, even if there’s no consensus now.

“This is an idea that seems to have some traction,” said Tricia Neuman, a Medicare expert for the nonpartisan Kaiser Family Foundation.

It’s also creating a lot of confusion about who is wealthy and who is not.

For example, when Obama talks about raising taxes on the rich, he means individuals making more than $200,000 a year and families above $250,000.

But his health care law fixed the level for paying “high-income” Medicare premiums at the current $85,000 and above for an individual, $170,000 for families.

And the new Republican plan would drop the thresholds to $80,000 for an individual and $160,000 for families.

“If we’re considering raising taxes on those with incomes above $250,000, then it seems to me very awkward to raise Medicare premiums on those with much lower incomes,” said John Rother, head of the National Coalition on Health Care, an advocacy group.

Baby boomers just signing up for Medicare are more likely to be affected than long-term retirees, since incomes tend to be higher for the newly retired.

AARP calls the proposed premium increases a tax hike. “Most of the time, when you have a payment due to the government because of your income, we call it a tax,” said lobbyist David Certner. “It’s a form of a tax.” High-earning workers already pay more in Medicare payroll taxes, he pointed out.

No way it’s a tax, say Republicans. Taxpayers subsidize three-quarters of the cost of Medicare’s outpatient and prescription coverage for the typical retiree. Reducing a subsidy for those who can afford to pay more is not the same thing as raising taxes, they contend.

“The proposal doesn’t raise taxes,” said Michelle Dimarob, spokeswoman for House Ways and Means Chairman Dave Camp, R-Mich. “The provision simply adjusts the subsidy they receive.”

To back their argument, Republicans are circulating a letter from anti-tax activist Grover Norquist in support of the broader bill containing the Medicare provision.

The premium hikes are to help pay for legislation that would prevent the Jan. 1 expiration of payroll tax cuts for workers and extra benefits for the long-term unemployed, while also staving off a steep cut in Medicare payments to doctors. With time running short, lawmakers of both parties are still far apart on key aspects of the package.

Tax or not, higher Medicare premiums mean less money in the pockets of those who have to pay. Currently the high-income premiums start at 35 percent of the cost of Medicare’s outpatient and drug coverage for individuals making $85,000 year, and rise to 80 percent of the cost at the very top income brackets.

Next year, a typical Medicare recipient will pay $131 a month for outpatient and drug coverage combined, according to Kaiser. Those paying the high-income premiums will pay from $183 to $417. That means beneficiaries at the highest income levels would pay nearly $300 a month more.

The House GOP plan would increase the high-income premium by 15 percent in 2017 and lower the thresholds at which the higher fees kick in.

Most significantly, it freezes those income thresholds indefinitely, until one-fourth of Medicare recipients are paying “high-income” premiums. It’s unclear how long that would take, but currently only about 2 million out of 47 million Medicare beneficiaries pay higher premiums. Eventually that number would easily surpass 10 million.

The GOP proposal would reduce taxpayer spending on Medicare by $31 billion over 10 years; Obama’s version saved about $20 billion.

“There’s a lot of interest in asking higher-income people on Medicare to contribute more,” said Neuman.

19 comments on this story so far. Add yours!

IHike4Fun on December 13 at 8:54 a.m.
I could be totally wrong but as I read the issues the problem with the tax on the rich (the current debate in congress) is that to fund 1 year extention to the payroll tax cut they are talking about a 10 year tax increase on the top 1%. I’m all in favor of everyone paying their ‘fair share’ but what about the other 9 years? So we extend the tax cut for 1 year but take 10 to pay it off? This is like their solution with the health care fiasco. Collect $$ for 10 years to pay for 6 years of care. OK and what happens after the 6 years runs out? The tax rate you and I pay just about doubles it seems to me.
DickAdams on December 13 at 9:03 a.m.
Don`t you just love the biased reporting of the AP? Where are the journalists of yesteryear when it was, for the most part, impossible to determine their political party of choice? Some of these fine reporters are turning over in their grave at what`s going on today.
Loudin on December 13 at 9:28 a.m.
Dick,
You only feel it’s biased because you disagree w/it; it’s that same sort of thing as when left-leaning people rant against Fox News.
As far as the AP piece is concerned, they provided input from the Administration (left partisan), from the AARP (elderly partisan), the offices of Norquest & Camp (right partisan) and the Kaiser Foundation (non-partisan). Alas, I’m sure those facts (that the piece was well-represented by viewpoints from many divergent groups) will have no impact upon your whining about this being a biased article. And why? Because it didn’t go your way…
O/T: Wouldn’t it be nice if adults in this country stopped acting like 5-year olds (“it’s my way or it’s wrong”) and start doing the right things for America? Diplomacy, working together to find solutions, give-and-take legislation, respect for people you disagree with? Yet Congress refuses to do so because they’re more worried about getting re-elected (which means getting on their knees for their child-like, ultra-partisan constituents) than the future of the country.
catfuzz on December 13 at 9:37 a.m.
Wow, raising premiums for individuals making over $85K? Aren’t these people “rich” by a liberals definition? So, in effect, they are getting what they want anyway!!
Dazzeetrader11 on December 13 at 9:53 a.m.
Raising taxes ( even if it isn’t called that) will sink the pubs. AP is terribly biased///this article focuses son the evil Pubs…but who authored the bill? Let
s get some facts out: it is the Dems doing Obama’s bidding. Norquist has nothing to do with any of this…it’s just “filler” (invoking Noequists’s name) as a way to tie the pubs to raising the government “take”: soley because someone is making more money than his neighbor.
Oh yes..it’s a tax alright. There will be no protection because someone calls it “MEDICARE”.
DISCRIMINATING AGAINST SOME ONE OR SOME GROUP BASED ON MONEY SHOULD BE ILLEGAL. i’M NOT SURE IT’S NOT.
greyhound2 on December 13 at 9:54 a.m.
According to a recent survey, Americans think that anyone making over $150,000 per year is considered “rich”. “Super rich” was pegged by JC Penny as an income over $400,000 per year, as it is impossible to spend more than that no matter how irresponsible you are.
DickAdams on December 13 at 10:03 a.m.
Loudin, obviously you haven`t read my opine by bringing up Fox news, inferring its my program of choice. I posted a comment about the low life hypocrite no spin liar, Bill O`Reilly. That jerk puts out more spin than a Indy race car tire. I do have a problem with the AP because of the family who started it up and their continued influence on what`s published. I`m sure you know who?
DickAdams on December 13 at 10:23 a.m.
Loudin, BTW, I forgot to mention the last time I checked, I have every right in this wonderful country to express myself through comments and your smart mouth saying, “Wouldn’t it be nice if adults in this country stopped acting like 5-year olds (“it’s my way or it’s wrong”) and start doing the right things for America?” your comment is digested food through the bull. And your giving credit to the insurance company AARP, and the current administration, you must be jesting surely? I did have a good laugh at your sources though.
oneanddone on December 13 at 10:28 a.m.
Greyhound, I could (and WOULD) spend $400k in the next 5 minutes with a call to Ferrari. Send me two TRs please - air freight.
Shadedmuse on December 13 at 10:33 a.m.
this should be the defining momemnt that we all vote out all repugnant Tea-bagger Freaks.
hunternomore on December 13 at 10:43 a.m.
Red flag. If Grover Nordquist says it’s good you know it has to be bad!
Shadedmuse on December 13 at 11:07 a.m.
Newton Gingrich is the answer then you know it must of been a dumb question?
4 more years 4 more years 4 more years.
Jethro_toll on December 13 at 11:40 a.m.
Why even vote anymore? The thieves we send to D.C. and Olympia are no different than the three stooges, laurel and hardy and the keystone cops.
Do congressmen pay medicate taxes on their gold plated medical plans? Cathy’s working on her second million.
fairchildairman on December 13 at 11:50 a.m.
Cathy McMorris Rodgers and her buddies continue to try every effort to deny Americans (and our Seniors) affordable health care.
http://www.youtube.com/watch?v=JQdz8N3Y0c4
Shadedmuse on December 13 at 12:32 p.m.
Its wrong to have the wage slaves subsize the wealthys tax cuts, if the tea-baggers keep this up then their will be beheadings in townsquare with the wealthy wall streat corperate class IE french revaloution style, off with their heads.
Shadedmuse on December 13 at 1:52 p.m.
As R greatestest President Obama says its not class war faire its basic Math. now get back on the short bus tea=baggers.
Dazzeetrader11 on December 13 at 3:47 p.m.
Government is not and should not be responsible to provide anything to anyone except the disabled and the poor people among us.
This is the typical thought process from a fairchildair boy federal employyee type I would expect. Government handout boys think like that.
Reality is now intervening. Time for you “handout types” to sober up. You want handouts or a country in tact? Your choice…but I implement or deny. Have fun.
misjustice on December 13 at 5:23 p.m.
“To back their argument, Republicans are circulating a letter from anti-tax activist Grover Norquist in support of the broader bill containing the Medicare provision.”
Well, if Grover says it isn’t a tax increase it must not be.
fairchildairman on December 13 at 9:17 p.m.
I’m glad Dazzee considers members of the U.S. Military as federal employee “handout boys”. I thought Conservatives were the true Patriots?