RAO Davao City

United States Military Retiree Activities Office Davao City, Philippines

MEDICARE PART D UPDATE 1May2008

Posted by Service Officer on April 30th, 2008

President Bush recently submitted a bill to Congress that would raise Medicare Part D premiums for seniors. The proposal would increase prescription drug premiums for individuals with incomes exceeding $82,000 and for couples with incomes greater than $164,000. Premiums would more than triple for individuals with incomes over $205,000 and couples with incomes over $410,000. Although fewer than 5% of people with Medicare drug coverage would be affected at first, increasing numbers of middle-income seniors and the disabled would pay higher premiums in the future. The President’s proposal also would freeze the income thresholds, with no annual adjustment. This would cause a problem similar to one currently affecting the taxation of Social Security benefits. When the tax was first enacted in 1983, the public was told that only higher income seniors would be affected. But because the income thresholds are not adjusted, and have remained at $25,000 for individuals and $32,000 for couples, middle-income seniors pay taxes on their benefits today.

The proposal comes in response to a forecast by Medicare Trustees that by 2013 more than 45% of Medicare’s spending will come from general tax revenue, as opposed to dedicated payroll taxes and premiums paid by beneficiaries. Under the 2003 Medicare drug law, the President must propose legislation to limit the government portion of Medicare spending and Congress is required to give the proposals expedited consideration. The law, however, does not force Congress to vote. The President’s Medicare bill does not include proposals to cut payments to hospitals or other health care providers. He did, however, submit an annual budget that would cut an estimated $481 billion from Medicare over the next ten years, according to the Congressional Budget Office. Despite the deep and widespread cuts, President Bush did not cut subsidies for private Medicare Advantage plans. The plans cost the government about 12% more than it pays for seniors enrolled in traditional Medicare. Since 2000, Social Security benefits have increased 22%, but Part B premiums have increased 111%.” [Source: New York Times article 16 Feb & CBO report 3 Mar 08 ++]

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