Rep. John Boehner, left, of Ohio, Senate Majority Leader Mitch McConnell of Ky., Senate Minority Leader Harry Reid, of Nev., and House Minority Leader Nancy Pelosi of Calif., sit during an event this week in Washington

Rep. John Boehner, left, of Ohio, Senate Majority Leader Mitch McConnell of Ky., Senate Minority Leader Harry Reid, of Nev., and House Minority Leader Nancy Pelosi of Calif., sit during an event this week in Washington Alex Brandon/AP

How Congress Reached a Deal to Stop a Medicare Premium Spike

Seniors will have to pay the cost eventually.

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.”