How the Health Bill Affects Medicare Out-of-Pocket Costs

High income retirees may experience premium increases


The health reform bill, which President Obama signed on March 23, made some important changes to Medicare that will affect some senior’s out-of-pocket costs. Retirees who reach the “donut hole” gap in prescription drug coverage will get a $250 rebate for their drug costs this year. Medicare beneficiaries will also receive preventive care and annual wellness checkups at no cost beginning in 2011.

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“There’s nothing in the legislation that reduces benefits or increases cost sharing for Medicare covered services,” says Tricia Neuman, director of the Medicare Policy Project at the Kaiser Family Foundation. “If anything the legislation expands coverage by improving coverage in Part D and adding Medicare covered preventative services.”

The Part D donut hole will be completely eliminated in 2020. Between 2011 and 2020 the coverage gap will be gradually filled in with prescription drug discounts from pharmaceutical manufacturers, federal subsidies, and lowering the threshold that qualifies a retiree for catastrophic prescription drug coverage.

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High income retirees, however, may see their out-of-pocket costs increase. Most relatively wealthy retirees already pay higher Medicare Part B premiums. The new legislation freezes the higher premium income thresholds from 2011 through 2019 at 2010 levels, which could cause more retirees to earn enough to be required to pay the higher rate as incomes increase. The health bill also reduces the Medicare Part D premium subsidy for individuals with income above $85,000 and couples who earn over $170,000 annually. “Some higher income folks who get their drug coverage through Part D will see their premiums go up,” says Jack Hoadley, a health policy analyst at Georgetown University.

[Read more about How the Health Care Bill Impacts Retirees.]