Obama seeks to create new Medicare income brackets

WASHINGTON -- President Barack Obama's plan to raise Medicare premiums for upper-income seniors would create five new income brackets to squeeze more revenue for the government from the top tiers of retirees, the administration revealed Friday.

First details of the plan emerged after Health and Human Services Secretary Kathleen Sebelius testified to Congress on the president's budget. As released two days earlier, the budget included only a vague description of a controversial proposal that has grown more ambitious since Obama last floated it.

"Means testing" has been part of Medicare since the George W. Bush administration, but ramping it up is bound to stir controversy. Republicans are intrigued, but most Democrats don't like the idea.

Obama's new budget calls for raising $50 billion over 10 years by increasing monthly "income-related" premiums for outpatient and prescription drug coverage.

Currently, single beneficiaries making more than $85,000 a year and couples earning more than $170,000 pay higher premiums. Obama's plan would raise the premiums and also freeze adjustments for inflation on income limits until one in four Medicare recipients were paying the higher charges. Right now, the higher monthly charges hit only about one in 20 Medicare recipients.

Starting in 2017, there would be nine income brackets on which the higher premiums would be charged. There are only four now.

If the proposal were in effect today, a retiree making $85,000 would pay about $168 a month for outpatient coverage, compared to $146.90 currently.

Under current law, the next bump up doesn't come until an individual makes more than $107,000. Under Obama's plan, it would come when that person crosses the line at $92,333. If the plan were in effect today, that beneficiary would pay about $195 a month for outpatient coverage under Medicare's Part B, rather than $146.90.

The top income step -- currently more than $214,000 -- would drop to $196,000. Individuals in the top tier would pay 90 percent of the cost of outpatient coverage, compared with 80 percent now.

The administration did not provide a comparable table for the effects on married couples.