Means Testing Equals Higher Premiums for Some on Medicare
For those who are over 65 or have parents, friends or relatives over 65 this may be of interest.
Concerning Medicare Part B coverage (physician and outpatient care):
First, the good news - Beginning in January, the premium will increase to only $93.50 monthly. (Earlier Medicare projections had estimated it to increase to $98.40 monthly.) Currently, the premium is $88.50 monthly.
Now, the bad news - For those individuals whose 2005 income was over $80,000 (or over $160,000 if married), the premium for 2007 will be $106 per month, beginning in January. This premium increases incrementally; those individuals whose 2005 income was over $200,000 will pay $162 per month. And these premiums will increase dramatically each year. Also, the income thresholds will be adjusted for inflation.
Social Security plans to inform individuals by December exactly how much they'll be paying next year. Obviously, there's nothing that can be done now concerning your 2005 income, but there may be some planning opportunities to reduce 2006 income (on which the 2008 premiums will be based). We'd be glad to advise you on these issues as they become appropriate.
Some additional facts:
This surcharge was established under a little-noticed provision of the 2003 Medicare law that added a prescription drug benefit to Medicare.
Means testing was enacted before - in 1988 - but sparked such outrage that Congress repealed the law in 1989.
The Internal Revenue Service will release tax return information to the Social Security Administration to identify which beneficiaries will have to pay higher premiums. The amount of the premium will be based on a person's adjusted gross income, with some modifications. The determination of who will be subject to the higher premium will be based on income from the tax year that occurred two years earlier.
Source: Wall Street Journal, 8/21/06 and 9/13/06