I am interested in the Medicare Program for FEHBlog purposes because there are hundreds of thousands of Medicare eligible enrollees in the FEHB Program. Generally, Federal employees who have had five years of FEHBP coverage immediately preceding retirement carry their FEHBP coverage into retirement with the full government contribution. Federal employees who retired after 1982 are eligible for Medicare Part A and can subscribe for Medicare Part B.
The Wall Street Journal (subscription required) reported on Tuesday that “Medicare beneficiaries will see a big jump in the premiums they pay for physician and other outpatient care, under the portion of the program known as Part B. Medicare officials said yesterday that premiums would increase next year by 11%, to $98.20 a month from $88.50, partly because of a surge in the volume and intensity of Part B services and a decision by Congress to override a reduction in physician payment that was scheduled to occur this year.”
Also in 2007, the Medicare Modernization Act of 2003 requires CMS to means test Part B premiums. The baseline is the 75% subsidy for beneficiaries with a taxable income of $80,000 (single) or $160,000 (couple). Above those income levels the subsidy will decrease thereby raising the Part B premium as follows:
- 65% premium subsidy for beneficiaries between $80,000 & $100,000
- 50% premium subsidy for beneficiaries between $100,000 & $150,000
- 35% premium subsidy for beneficiaries between $150,000 & $200,000
- 20% premium subsidy for beneficiaries over $200,000
These increases will be phased over a five year period. The change is expected to affect only 3% of Medicare beneficiaries. What’s more according to the Journal and the Washington Post , the Medicare Trustees now are projecting that Part A Trust Fund will run out of money in 2018, which is “two years sooner than predicted a year ago and 12 years sooner than had been anticipated when President Bush first took office.” This report has an immediate Congressional ramification according to the Wall Street Journal report: “Under a requirement passed with the Medicare drug benefit, legislative action is supposed to occur if Medicare’s trustees predict that, within the first seven years of their annual 75-year projections, general revenues fund more than 45% of total Medicare spending for two years in a row. Yesterday’s report said that threshold would be reached in 2012. That means the trigger for action would occur in 2007 if projections hold. President Bush would be required to propose legislative changes, and Congress would have to give them fast-track consideration.”That will be an interesting development shortly before the next Presidential election.