Medicare premiums may rise for some retirees

WASHINGTON -- They may not agree on much else, but there's a change to Medicare that President Barack Obama and Republicans both support: Expand a little-known law so more retirees that the government considers well-off are required to pay higher monthly premiums.

It's on the short list in the budget talks, raising $20 billion or more over 10 years.

That could come as a shock to many seniors who would have to pay the higher premiums and consider themselves comfortably middle-class, yet by no means wealthy.

It happened to Tom James. He and his wife recently got an official notice that they will have to start paying more for Medicare next year, about $1,000 for the two of them.

James is among 2 million beneficiaries facing higher "income-related" premiums for outpatient care, or Medicare Part B. If the budget proposal goes through, that number would grow over time to 20 million.

"I was blindsided," said James, a retired bank examiner who lives near Philadelphia. "The camel has got his nose in the tent now, and the question is how far do they want to go with that?"

Income-based premiums were introduced for outpatient care under President George W. Bush and expanded later to the prescription benefit, or Medicare Part D, by Obama's health care law. The idea now is to keep broadening their reach.

How would it work? Think of it as two bites.

First, the current income-based premiums would be ratcheted up. Those surcharges are assessed on a sliding scale, and kick in for individual beneficiaries making more than $85,000, or $170,000 for couples.

Second, the number of beneficiaries who have to pay higher monthly premiums would be gradually expanded by a few hundred thousand people each year. That would be done by extending a temporary freeze on the income thresholds at which the higher premiums are assessed.

Without adjusting the thresholds for inflation, the share of beneficiaries on the hook for higher premiums would keep growing from 5 percent currently until it reached 25 percent, or 1 in 4 people with Medicare.

Backers of the idea -- Obama administration officials, prominent Republicans in the House and Senate and nonpartisan experts -- say it's foolish for Medicare to keep subsidizing people who can pay their own way, particularly when the program faces long-range financial problems.

Medicare serves about 50 million Americans, including seniors and disabled people. Half have annual incomes below $22,500.