The Medicare Part B monthly premium will be $99.90 in 2012. This will mean a small increase for the majority of Medicare beneficiaries who have been paying $96.40 since 2009. Those who began their Medicare coverage in 2010 or 2011 have been paying $110.50 or $115.40, so their Part B premium will go down.

For people receiving Social Security, the Part B premium is taken out of their monthly check.  Because there was no cost of living adjustment (COLA) in 2010 or 2011, the Part B premium was not raised for those already in the Medicare system.  Starting in January 2012, Social Security recipients will be getting 3.6% more in their check each month. That means $36 for a person receiving $1,000 per month.

PART B PREMIUM SHOULD BE $300.

The bad news for Medicare is that the Part B premium really should be much higher, because $99.90 times 47 million Medicare beneficiaries equals just  25% of the total money spent under Part B.  This means that 75% of Medicare Part B expenditures are paid through the federal government’s general fund.   And this is what politicians are fighting over as they seek to cut the federal budget. Republicans want to cut the amount of general revenue funds that go to Medicare – but how to do that without hurting seniors is the trillion dollar question.

PART A BUDGET IS MOSTLY BALANCED

Medicare Part A covers hospitalization, skilled nursing facility charges, home health care, and hospice. Payroll taxes go directly to the Part A TRUST fund, and tax revenues covered all Part A expenditures up until 2008. Since 2008, the trust fund has had to use some of its surplus saved up from previous years to balance the Part A budget.

PART B BUDGET IS NOT BALANCED

The Part B budget is way out of balance because Part B premium revenues cover only 25% of Part B expenditures.  Part B covers things such as doctor services, lab tests, diagnostic tests, physical therapy, chemotherapy and radiation therapy.

During the Bush Administration, Congress approved higher Part B premiums for Medicare beneficiaries earning more than $85,000 as an individual or $170.000 as a couple. Premiums are based on a sliding scale for income up to $214,000 for an individual and $428,000 for a couple. The highest Part B premium will be $319.70 in 2012.

About 5 percent of Medicare beneficiaries now pay a higher premium based on their income.  Under some budget-cutting plans, 25% of seniors would pay a higher Part B premium in the future.

TO SUMMARIZE: The Part B premium should be $319.70, but 95% of folks on Medicare are getting a 75% discount. This is what the fight over Medicare is all about. And, with baby boomers turning 65 at a rate of 10,000 per day, the number of people covered by Medicare is growing faster than ever before and will make the revenue to expense gap even wider.

Medicare dodged the bullet in the recent battle over deficit reduction, but the next fight will soon begin.  The agreement that was reached to raise the debt limit and avoid default by the U.S. government requires leaders of both parties to appoint 12 members to a “Super Committee” that must come up with at least $1.5 trillion in spending cuts.  The Committee must finish its work by November 23, 2011, and Congress must vote to approve or reject their proposals by December 23rd.

According to the Center for Medicare Advocacy, there have been many proposals for cutting Medicare, in addition to the Ryan plan for privatizing Medicare and turning it into a voucher program.  Ideas that have received a better reception and might be part of the Super Committee’s final proposal include the following possible changes to Medicare:

• Raising the Age of Eligibility From 65 to 67
• Combining Part A and B Deductibles Into a Single Annual Deductible – Different proposals sought to create a deductible between $550 and $560, impose 20% cost-sharing on all Medicare services (including Part A services that currently require either no cost-sharing, or a set co-pay), coupled with a total annual out-of-pocket cap of between $5,250 and $7,500;
• Additional Means Testing of Medicare – Currently, higher income beneficiaries pay a larger share of their Part B and Part D premiums; one proposal sought to increase Part B premiums from 25% to 35% of program costs for those not already paying income-related premiums;
• Eliminating First-Dollar Medigap Coverage – This proposal prohibits Medigap plans covering the first $500 of cost-sharing and limits coverage to 50% of the next $5,000 (might include policies already held by individuals)
• Shifting Coverage of Persons Dually Eligible for Medicare and Medicaid (Dual eligibles) to Medicaid – This proposal gives Medicaid full responsibility for providing health coverage for persons dually eligible for Medicare and Medicaid, and requires Medicaid plans to place dual eligibles in Medicaid managed care plans.

Medicare and Social Security are exempt from large cuts.

If the Super Committee fails to agree on spending cuts to a long list of government programs, or Congress votes against the final proposal by the Super Committee, that will trigger automatic  spending reductions across the board, with Department of Defense taking the biggest hit. But Social Security and Medicare would be exempt from large cuts, and any cuts that are made would be directed at providers rather than patients. Of course, if doctors take the hit, they can decide to stop seeing Medicare patients.

So the struggle continues and it will take place behind closed doors until November, when the public will find out who gets hurt the most from the large cuts that will be made in government spending.

How did a Democrat win a Congressional seat in a district that always votes overwhelmingly Republican?  Medicare is the answer.  The Associated Press described the results:

The Democrat rode a wave of voter discontent over the national GOP’s plan to change Medicare and overcame decades of GOP dominance here to capture Tuesday’s special election in New York’s 26th Congressional District.

…The special election that became a referendum on the health care plan for the nation’s seniors may serve as a warning shot to further GOP efforts to cut popular entitlement programs.

The Democratic candidate, Kathy Hochul, got the message right by saying we can’t decimate Medicare while giving billions of dollars in tax breaks to oil companies. It’s a simple message and it resonates with voters: young, old, independent, and even Republicans.

This was a special election to fill a seat in Congress vacated by a Republican who left office amid a scandal over his Craig’s List pick up posts and picture (looking buff with no shirt on). He was a married man who had campaigned on family values.  Yuck!  That guy won the 2008 election with 70% of the vote.

Republicans have attacked their own who have dared to speak against the Paul Ryan plan to turn Medicare into a  voucher system and hand it over to insurance companies.  The House of Representatives recently voted for the Ryan budget, and almost every Republican endorsed ending Medicare as we know it – or as Newt Gingrich put it,  “radical social engineering”. Democrats in the Senate will force a vote on the Ryan budget soon, so Republican senators can go on record with their position on the future of Medicare.

I’m looking forward to 2012 as I continue to blog about Medicare. What fun this is  going to be!