Medicare premiums for richest to go up 83% in '07

WASHINGTON — Most seniors will have to pay 5.6 percent more for basic Medicare coverage next year, officials announced Tuesday. But premiums for more affluent beneficiaries will increase by as much as 83 percent, because the federal government for the first time will require wealthier people to pay more.

The standard monthly premium for Part B, which covers doctors' visits and outpatient hospital care, will rise to $93.50 from $88.50 this year, said Mark McClellan, head of the Centers for Medicare and Medicaid Services. Individuals with an annual income of more than $80,000 will pay monthly premiums of $106 to $162.10, depending on income.

About 1.5 million of the 42 million Americans on Medicare will have to pay the higher premiums based on income, a change mandated by Congress as part of the 2003 law that created the Medicare drug benefit. McClellan said the new income-based premiums will save the financially troubled program $7.7 billion over five years and more than $20 billion over a decade.

Even at the higher rates, Medicare remains a good deal, he said. The most affluent beneficiaries, those with individual incomes of more than $200,000 a year, will pay just under $2,000 a year in premiums while receiving an average of $4,300 a year in benefits.

The leader of one organization for seniors predicted that the higher premiums would drive away some more affluent seniors, undermining Medicare's broad political support and its finances.

"As healthier and wealthier seniors see their premiums rise, we fear that when that premium equals what they could pay for regular health insurance, why be in the program at all?" said Shannon Benton, executive director of the Senior Citizens League, an advocacy group with 1.2 million members. "We feel that eventually the sickest, the oldest and the poorest are going to be the ones left behind in Medicare, and their costs are going to go up significantly to sustain the program."

Medicare officials said they expect 9,000 people to drop out of the program next year because of the new income-based premiums, and 30,000 to leave by 2010. Overall, that's not a lot, they said.

"I don't see any substantial adverse impacts on participation in Medicare, and I definitely see a very positive impact on making Medicare sustainable for the long term," McClellan said.

Officials said the standard premium increase of 5.6 percent is the smallest since 2001.