Patricia A. Davis Specialist in Health Care Financing
is a federal insurance program that pays for covered health care services of
most individuals aged 65 and over and certain disabled persons. In 2012,
the program is expected to cover 50 million persons (41 million aged and 9
million disabled) at a total cost of $586 billion. Most individuals (or
their spouses) who are 65 and older, and have worked in covered employment
and paid Medicare payroll taxes for 40 quarters receive premium-free Medicare
Part A (Hospital Insurance). Those entitled to Medicare Part A (regardless
of whether they are eligible for premium-free Part A), have the option of
enrolling in Part B, which covers such things as physician and outpatient
services and medical equipment.
Beneficiaries have a seven-month initial enrollment period, but those who
enroll in Part B after their initial enrollment period and/or reenroll
after a termination of coverage may be subject to a “delayed enrollment
penalty” which is equal to a 10% surcharge for each 12 months of delay in enrollment
and/or reenrollment. Under certain conditions, select beneficiaries are exempt
from the delayed enrollment penalty; these include working individuals
(and their spouses) with group coverage, some military retirees, and some
While Part A is financed primarily by payroll taxes paid by current workers,
Part B is financed through a combination of beneficiary premiums and
federal general revenues. The standard Part B premiums are set to cover
25% of projected per capita Part B program costs for the aged, with federal
general revenues accounting for the remaining amount. In general, if projected
Part B costs increase or decrease, the premium rises or falls proportionately.
Most Part B participants must pay monthly premiums, which do not vary with a
beneficiary’s age, health status or place of residence. However, since
2007, higher-income enrollees pay higher premiums to cover a higher
percentage of Part B costs. Premiums of those receiving benefits through
Social Security are deducted from their monthly payments. Additionally, certain
lowincome beneficiaries may qualify for Medicare cost-sharing and/or
premium assistance from Medicaid through a Medicare Savings Program. The
Social Security Act includes a provision that holds most Social Security
beneficiaries harmless for increases in the Medicare Part B premium; affected
beneficiaries’ Part B premiums are reduced to ensure that their Social Security
checks do not decline from one year to the next.
Each year, the Centers for Medicare & Medicaid Services (CMS) determines
the Medicare Part B premiums for the following year. The standard monthly
Part B premium for 2012 is $99.90. Higher-income beneficiaries, currently
defined as those with incomes over $85,000 a year, or couples with incomes
over $170,000 per year, pay $139.90, $199.80, $259.70, or $319.80 per month,
depending on their income levels.
The 2013 Part B premiums rates were announced in November 2012. The standard
2013 premium will be $104.90 per month, and the higher monthly premium
amounts will be $146.90, $209.80, $272.70, or $335.70, depending on income
level. The income thresholds will be the same as those in 2012. This CRS
report will be updated in early 2013.
Current issues related to the Part B premium that may come before Congress
include the amount of the premium and the rate of increase in recent years
(and the potential net impact on Social Security benefits), modifications
to the late enrollment penalty, and possible increases in Medicare
premiums as a means to reduce federal spending and deficits.
Date of Report: December 12, 2012
Number of Pages: 37 Order Number: R40082 Price: $29.95
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