Featured Research

from universities, journals, and other organizations

Retirement expert: Medicare already means-tested

Date:
April 29, 2013
Source:
University of Illinois at Urbana-Champaign
Summary:
The Obama administration's controversial proposal to means-test Medicare recipients has one small problem -- the Medicare program is already means-tested, says an expert on retirement benefits.

The Obama administration's controversial proposal to "means-test" Medicare recipients is ostensibly aimed at generating more cash for the government from those who can afford it -- or squeezing more money out of upper-income seniors, depending upon one's point of view. But according to a University of Illinois expert on retirement benefits, the Medicare program is already means-tested.

Related Articles


Law professor Richard L. Kaplan says whenever the issue of cutting Medicare emerges, one of the first ideas to "fix" the program is to make its upper-income beneficiaries pay more.

"Indeed, the claim is often advanced that it is silly -- if not offensive -- to have low-income workers pay higher taxes so that wealthy beneficiaries can receive subsidized benefits from the Medicare program," said Kaplan, the Peer and Sarah Pedersen Professor at Illinois. "But the underlying premise is that Medicare is not already means-tested, and that is simply not the case."

Medicare Part A is financed by a 2.9 percent payroll tax imposed on all wages, salaries and income from self-employment, so higher-earning people already pay more for their Part A benefits. Starting this year, individuals with annual earnings above $200,000 and married couples with annual earnings above $250,000 will owe an additional 0.9 percent in Medicare tax, according to Kaplan.

Those taxpayers also will owe a 3.8 percent Medicare tax on their investment income in excess of those same thresholds.

Medicare Part B and Part D employ a more direct form of means-testing -namely, increased premiums based on taxable income during one's retirement years, Kaplan said.

"Eschewing the precise mechanics of the applicable provisions, any Medicare beneficiary whose income exceeds an annually determined threshold pays an increased amount for coverage under these components of Medicare," Kaplan said.

"Thus, once taxable income with certain adjustments reaches the specified threshold, the amount paid by enrollees in either Medicare Part B or Medicare Part D is increased according to a four-step rate schedule."

Moreover, the formula was made more severe when the health care reform legislation enacted in 2010 froze the applicable income thresholds for the next 10 years, Kaplan said.

"Those thresholds are not indexed for inflation and will therefore affect more people over time," he said. "Furthermore, the Obama administration has proposed adding additional brackets -- a total of nine brackets versus the four we have now -- so that charges rise faster as income goes up."

Kaplan said that unlike Social Security benefits, which bear a close relationship to one's pre-retirement earnings, there is no correlation between one's pre-retirement earnings and the benefits a person receives from Medicare Part A.

"The value of Medicare benefits received correlates with a person's health, not wealth, so a less-healthy retiree will receive more from Medicare than a healthier retiree," he said. "To the extent that wealthy retirees are healthier than their poorer counterparts, there is an inverse relationship between income prior to retirement and benefits received from the Medicare program."

According to Kaplan, some policymakers oppose the very concept of means-testing benefits, regardless of the specific formula employed, arguing that Medicare is a social insurance program and should provide equal benefits to all participants regardless of their individual resources.

"Means-testing benefits, in their view, risks converting Medicare into another welfare-oriented program, with the possible erosion of popular support and potential exposure to the sort of reductions that such programs often suffer in difficult economic times," Kaplan said. "Other policymakers oppose means-testing Medicare because they regard reducing promised benefits on the basis of income as a disguised tax, a penalty on 'success,' in their view."

Thus, the idea that Medicare benefits should be means-tested raises genuine philosophical issues and is not a policy "slam dunk."

"The bottom line is that the individual components of Medicare are means-tested currently," Kaplan said. "Some lawmakers, no doubt, might prefer that the degree to which Medicare is means-tested be increased, but the fact remains that Medicare is already means-tested."


Story Source:

The above story is based on materials provided by University of Illinois at Urbana-Champaign. Note: Materials may be edited for content and length.


Journal Reference:

  1. Richard L. Kaplan. Top Ten Myths of Medicare. SSRN Electronic Journal; The Elder Law Journal, 2012; DOI: 10.2139/ssrn.2111535

Cite This Page:

University of Illinois at Urbana-Champaign. "Retirement expert: Medicare already means-tested." ScienceDaily. ScienceDaily, 29 April 2013. <www.sciencedaily.com/releases/2013/04/130429164919.htm>.
University of Illinois at Urbana-Champaign. (2013, April 29). Retirement expert: Medicare already means-tested. ScienceDaily. Retrieved October 25, 2014 from www.sciencedaily.com/releases/2013/04/130429164919.htm
University of Illinois at Urbana-Champaign. "Retirement expert: Medicare already means-tested." ScienceDaily. www.sciencedaily.com/releases/2013/04/130429164919.htm (accessed October 25, 2014).

Share This



More Health & Medicine News

Saturday, October 25, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Texas Nurse Nina Pham Cured of Ebola

Texas Nurse Nina Pham Cured of Ebola

AFP (Oct. 25, 2014) — An American nurse who contracted Ebola while caring for a Liberian patient in Texas has been declared free of the virus and will leave the hospital. Duration: 01:01 Video provided by AFP
Powered by NewsLook.com
IKEA Desk Converts From Standing to Sitting With One Button

IKEA Desk Converts From Standing to Sitting With One Button

Buzz60 (Oct. 24, 2014) — IKEA is out with a new convertible desk that can convert from a sitting desk to a standing one with just the push of a button. Jen Markham explains. Video provided by Buzz60
Powered by NewsLook.com
Ebola Protective Suits Being Made in China

Ebola Protective Suits Being Made in China

AFP (Oct. 24, 2014) — A factory in China is busy making Ebola protective suits for healthcare workers and others fighting the spread of the virus. Duration: 00:38 Video provided by AFP
Powered by NewsLook.com
WHO: Millions of Ebola Vaccine Doses by 2015

WHO: Millions of Ebola Vaccine Doses by 2015

AP (Oct. 24, 2014) — The World Health Organization said on Friday that millions of doses of two experimental Ebola vaccines could be ready for use in 2015 and five more experimental vaccines would start being tested in March. (Oct. 24) Video provided by AP
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
 
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:  

Breaking News:

Strange & Offbeat Stories

 

Health & Medicine

Mind & Brain

Living & Well

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:  

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile iPhone Android Web
Follow Facebook Twitter Google+
Subscribe RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins