How Congress Reached a Deal to Stop a Medicare Premium Spike

The budget deal that passed the Sen­ate early Fri­day morn­ing pre­vents Medi­care premi­ums from rising 52 per­cent for more than a quarter of be­ne­fi­ciar­ies in 2016 - but it also re­quires those seni­ors to even­tu­ally pay the gov­ern­ment back.

At is­sue was a loom­ing 52 per­cent spike in Medi­care premi­ums and de­duct­ibles that would be­gin next year for a siz­able por­tion of seni­ors. Hop­ing to solve that prob­lem, Con­gress’ deal will re­duce the rate in­crease while re­quir­ing seni­ors to even­tu­ally pay the money the gov­ern­ment loses back over time.

And the prob­lem stems from this: about 70 per­cent of Medi­care re­cip­i­ents are “held harm­less,” mean­ing their Medi­care premi­ums are pro­hib­ited from in­creas­ing more than their So­cial Se­cur­ity be­ne­fit, while the oth­er 30 per­cent of seni­ors are not “held harm­less.” Typ­ic­ally, Medi­care premi­ums in­crease every year as health care costs rise. However, this year, there was no So­cial Se­cur­ity cost of liv­ing ad­just­ment, and seni­ors who are held harm­less will have no in­crease in their premi­ums. But health care still has to be paid for, and so the in­creased costs of provid­ing health care to all Medi­care re­cip­i­ents would have been shouldered by the seni­ors who are not held harm­less through in­creased premi­ums.

The Medi­care deal pays for it­self by cre­at­ing a more mod­est in­crease in premi­ums for 30 per­cent of seni­ors in 2016, but then adding an ad­di­tion­al $3 to those seni­ors’ monthly premi­ums un­til the “loan” from the Fed­er­al Treas­ury to the Sup­ple­ment­al Med­ic­al In­sur­ance Trust Fund is paid off. Medi­care be­ne­fi­ciar­ies who cur­rently pay high­er in­come-re­lated premi­ums - for ex­ample, wealth­i­er seni­ors or those whose premi­ums are paid by Medi­caid - will pay more than an ad­di­tion­al $3 a month to re­pay the loan.

“It’s ba­sic­ally spread­ing that in­crease over the next nine years,” said Loren Adler, a re­search dir­ect­or at the Com­mit­tee for a Re­spons­ible Fed­er­al Budget.

The deal came only after sig­ni­fic­ant wrangling. House Minor­ity Lead­er Nancy Pelosi in­sisted the fix be in­cluded in the budget deal after House lead­er­ship failed to ad­dress the prob­lem earli­er in the month. Pelosi had also brought up the pos­sib­il­ity of in­clud­ing the fix in the con­tinu­ing res­ol­u­tion that passed both cham­bers in late Septem­ber, but that nev­er happened.

On Fri­day, three days be­fore the budget deal was an­nounced, Re­pub­lic­ans pro­posed a pack­age that did not in­clude a Part B fix. In­tense ne­go­ti­ations con­tin­ued over the week­end, and the fix was slipped in­to the deal by Monday night.

“We’re very pleased to have worked…on stop­ping a sharp in­crease in Medi­care Part B pay­ments for our seni­ors,” Pelosi said on Thursday. “The se­cur­ity of our coun­try, the growth of our eco­nomy, the fin­an­cial sta­bil­ity of our seni­ors and people with dis­ab­il­it­ies – for the full faith and cred­it of the United States of Amer­ica, we’re very proud.”

Un­der the budget deal, seni­ors not held harm­less will pay $120 a month, while the ma­jor­ity of be­ne­fi­ciar­ies will pay the 2015 rate for their cov­er­age, $104.90. Without the deal, premi­ums for non-held harm­less seni­ors would have spiked to $159.30.

The 30 per­cent of seni­ors who are not held harm­less in­clude high-in­come be­ne­fi­ciar­ies, new be­ne­fi­ciar­ies, be­ne­fi­ciar­ies who have not star­ted re­ceiv­ing So­cial Se­cur­ity, those whose premi­ums are paid by Medi­caid and cer­tain state and loc­al em­ploy­ees who do not par­ti­cip­ate in So­cial Se­cur­ity.

Earli­er this month, Sen. Ron Wyden, rank­ing mem­ber of the Sen­ate Fin­ance Com­mit­tee, in­tro­duced le­gis­la­tion that would have held all premi­ums at $104.90, but it not in­clude an off­set to pre­vent it from adding to the budget de­fi­cit. The bill was co­sponsored by 28 Demo­crats and both in­de­pend­ent sen­at­ors.

Still, Demo­crats seem pleased with the solu­tion reached in the budget deal: “It’s very good,” said Sen. Debbie Stabenow, a Michigan Demo­crat. “It ba­sic­ally stops what would have been at least a 50 per­cent in­crease in Medi­care.”