Wednesday, November 28, 2012

Medicare premiums are already means tested

It’s worthy of note that Medicare premiums are already somewhat means tested. 

There is a SSA link that explains the rules, with the "heart of darkness" of the matter here

Social Security looks at your 1040 and computes a MAGI (Modified Adjusted Gross Income) by adding tax-exempt income.  A single person with a MAGI of over $85000 would pay $40 for Part B, until he reaches $107000.  About $214000 the additional premium can be a whopping $219.08 for 2012.
Social Security says that right now this affects less than 5% of beneficiaries, so relatively few people know this.

A moralist could propose looking at how much investment income a person has as a sign of accumulated wealth, and use it as another excuse for means testing.

NBC Nightly News covered the current means testing of Medicare Part B premiums tonight (Wednesday, November 28, 2012) and hinted that reform could means test Medicare premiums even more. Since Supplemental Insurance is private, it normally would not be means tested (and substantial discounts are available through AARP if the person signs up when starting Medicare).

If Medicare premiums for the wealthy are raised even more, some of the people could buy substitute Medicare Advantage policies on the open market, as private insurance companies would step in and probably offer better deals to healthier seniors.  But sicker patients would be left to Medicare -- the old cherry picking problem. 

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I pay about $99 for Part B, and about $110 (as I recall) for the Supplemental.  That's over $200 a month, plus about $40 or so for Part D. 

By comparison, my retiree health insurance through United Health Care at age 64 from ING (my last major employer) was about $168 (in 2007-2008) but covered only 70% of hospitalization, which I never needed.  I did need an outpatient cat scan in 2005, and found that having insurance coverage at all through UHC and ING knocked the "list" price from $1700 to $380 (the ING contract price with the provider) for the procedure (about $180 was out of pocket).  In 2010, under Medicare, the contract price for an outpatient double hernia repair dropped from a list $14000 to a reasonable $3500, and UHC paid the 20% copay (about $620).  You pay a lot less out of pocket merely by having any insurance at all from a big company. The hospital gets repeat business.  (Auto insurance works the same way with dealer repair shops, and so does property insurance with reputable contractors.) 

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