On April 16, 2015, President Obama signed into law the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”). This new law raises Medicare premiums for higher-income retirees, who will be paying more for their Part B and Part D coverage in the future. I may have missed the outcries from the left and the right about this, and believe it warrants further discussion. Silence may be a collective sigh of relief in order to digest the compromise permanent elimination of the annual SGR can-kicking rodeo.
Increased beneficiary cost sharing could be considered a political “third rail". Are the increased Part B premiums for high-income beneficiaries in effect since 2007 a progressive tax, or are they the slippery slope of a means-tested welfare program? Is MACRA a "Third Way" law?
Section 402 of MACRA addresses income-related premium adjustments for Parts B and D.
In 2015 individuals with modified adjusted gross income (MAGI) of $85,000 or less and couples with $170,000 or less pay only the base Part B premium of $104.90. Several income brackets had been created in 2007, with enrollees in higher brackets paying a greater percentage of program costs. Higher income beneficiaries likewise pay higher premiums for their Part D coverage. Currently, individual Medicare beneficiaries with incomes between $107,000 and $160,000 pay 50% of average annual per capita program expenditures, those with incomes $160,000- $214,000 pay 65%, and those with incomes > $214,000 pay 80%. MACRA lowers the thresholds at which beneficiaries must pay higher applicable percentages of program costs. Beginning in 2018, the income levels and ranges change as follows:
• Income $107,000-$133,500 will pay 50% of average annual per capita program expenditures
• Income $133,500-$160,000 will pay 65%
• Income > $160,000 will pay 80%
These levels would remain constant for 2018 and 2019. Beginning in 2020, these thresholds would be updated annually based on inflation, yet in such a fashion as to reduce future inflation adjustments to the brackets. The prior law froze the income thresholds through 2019, at which point they were to be indexed to inflation as if they had not been frozen. In MACRA, any prior inflation will be disregarded, and the threshold for inflation will be based on the brackets as they are in 2019. Reducing the inflation adjustment in this manner is expected to increase the number of beneficiaries who will be subject to higher Medicare premiums.
More follows the labyrinthine squiggle.