Proposed budget compromise includes gradual increase in Medicare premiums

About Liz Seegert

Liz Seegert (@lseegert), is AHCJ’s topic editor on aging. Her work has appeared in, Journal of Active Aging, Cancer Today, Kaiser Health News, the Connecticut Health I-Team and other outlets. She is a senior fellow at the Center for Health Policy and Media Engagement at George Washington University and co-produces the HealthCetera podcast.

While much of America was watching the New York Mets and Kansas City Royals battle it out for 14 long innings Tuesday night, House Republican leadership and the White House were battling out a budget compromise. The agreement still must be approved by the full House and the Senate. Update: The House passed the bill with a 266 to 167 vote late Wednesday and the Senate approved it on Friday.

The bill funds federal government for the next two years and avoids a potential government shutdown. The deal plugs an impending hole in the Social Security disability trust fund. Without it, millions getting disability would have seen their benefits significantly cut. It also staves off a potentially historic increase in Medicare for Part B premiums for about 15 million beneficiaries.

The Medicare provision stalls a scheduled cut to the rates doctors get paid under Medicare by law for three months. Legislators hope to come up with a permanent fix to slow Medicare costs.

Modifications to the Social Security Disability Insurance program would standardize varying state eligibility requirements, which, as The New York Times reports, could save the government $5 billion. According to The Hill, “The deal would specifically extend the 2 percent payment cut to Medicare under the sequester.”

The 144-page budget bill will “Maintain 2016 Medicare part B premium and deductible levels consistent with actuarially fair rates.” This will be done via a “loan” to the Medicare Trust Fund from the general Treasury. The loan will be repaid over time by gradual increases in beneficiaries’ premiums – a much better trade off than what could have been a 50 percent increase for nearly a third of beneficiaries. The new base rate would rise to $120 from $104; a 14 percent hike. Higher-income beneficiaries would pay an additional $3 per month surcharge.

However, there are also some big changes looming for spouses, ex-spouses and children. According to this analysis by Boston University Professor Laurence Kotlikoff, Social Security “benefits now being received by spouses, divorced spouses or children on the work record of a spouse, ex-spouse or parent who has suspended his or her benefits will be eliminated until the worker restarts his/her retirement benefit.”

He writes, “this will cost millions of households tens of thousands of dollars. Worse, it will induce those who have suspended their benefits in order to collect higher benefits at 70 to restart their benefits at permanently lower levels in order to maintain their family’s immediate living standards.” This is especially troubling for many older adults who often completely rely on a spouse’s Social Security benefits to live. Kotlikoff’s column provides an excellent explanation of the Catch-22 under consideration.

The bill is outgoing House Speaker John Boehner’s swan song. Boehner exits Congress on Oct. 30. As The Associated Press reported, the speaker pushed the plan through despite vehement opposition from the more conservative elements of his party.

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