Armonk, NY – A little-known provision of the law creating the Medicare Part D drug plan will soon take a chunk out of the pocketbooks of seniors across the country by means testing Medicare Part B for the first time in history.  The Administration has also proposed the removal of inflation adjustments for Medicare Part B, which could result in higher premiums for millions more Medicare beneficiaries in the coming years.

“The Medicare Part D drug program was bad enough, causing confusion and failing to substantially lower drug costs for millions of seniors.  Now we learn that this legislation will actually increase premiums for many seniors who depend on Medicare Part B for their primary health coverage,” said Lowey.  “This one-two punch puts many seniors’ financial security more at risk.”

Since 2000, Medicare Part B premiums have doubled.  The law creating the prescription drug program, the Medicare Modernization Act of 2003, will require many seniors to pay even higher Part B premiums depending on income.  Currently, the federal government assumes 75 percent of the Medicare Part B premium, and the beneficiary pays the remaining 25 percent or $88.50 a month in 2006.  

Starting in 2007, the federal government’s share will be reduced on a sliding scale for beneficiaries with annual incomes over $80,000, or $160,000 for couples.  By 2009, the government’s portion will drop to 65 percent for individuals with annual incomes between $80,000 and $100,000, 50 percent for $100,000 to $150,000, 35 percent for $150,000 to $200,000, and 20 percent for annual incomes over $200,000.

Next year, seniors with an income of $80,000 could see premiums increase from $88.50 per month to $173, almost double the current cost.  Within three years, some seniors could pay as much as $413 per month for Part B. 

The Medicare Modernization Act of 2003 would have adjusted these figures to inflation.  However, President George W. Bush’s recent budget proposal would eliminate those inflation adjustments, resulting in higher premiums for more and more middle class seniors over time.  As annual incomes rise with inflation, no adjustment would be made to the income threshold for means testing in Medicare Part B. 

For example, a senior with an annual income of $80,000 in five years will likely have less buying power than a senior with the same income today; however, the President’s plan would hold the means testing threshold at $80,000 regardless of inflation.  According to the Congressional Research Service, assuming a 3% rate of inflation, a senior with an income of $69,000 today will cross the $80,000 threshold within only five years.

Ninety-three percent of Medicare’s 44 million beneficiaries have Part B coverage.  According to the Congressional Budget Office, means testing with adjustments for inflation would hit 1.2 million seniors with higher premiums in 2007 and at least 2.8 million, or six percent of current beneficiaries, by 2013. 

Under President Bush’s plan to eliminate adjustments for inflation, even more seniors would pay higher rates for Part B. In addition, seniors would likely be affected at a higher rate in our area where the median income level and the cost of living are generally higher than other regions.

Local seniors joined Congresswoman Lowey today to discuss the financial hardships that will result from means testing.  Lowey is fighting the President’s budget proposal that would remove inflation adjustments in order to protect working class seniors.  She also announced that she is preparing to introduce new legislation to stop means testing from taking effect.

The National Active and Retired Federal Employees Association (NARFE), the Seniors Citizens League, and the National Committee to Preserve Social Security and Medicare endorsed Lowey’s legislation.  NARFE representatives joined Lowey at the press conference today.

“Instead of lowering overall drug and health costs, this provision of the Medicare Part D bill could significantly increase the cost of basic health coverage for millions of seniors,” said Lowey.  “I’m going to do everything I can to stop this from hurting current and future Medicare beneficiaries.”