Medicare to decide payments by income

Wealthy Americans will have to pay more to get basic health care through Medicare while the elderly would be charged less. Medicare monthly premiums for physician care and outpatient hospital services will rise by 5.6 percent next year for most people, the smallest-percentage rate increase since 2001, but as much as 83 percent the richer Americans.

For the first time the charges will be decided by income. Individuals earning more than $80,000 a year, or married couples earning over $160,000, will pay a bigger premium. Such individuals comprise about 4 percent of Medicare enrollees, or 1.5 million of 42 million beneficiaries.

Other 96 percent of Medicare users will pay the lowest premium, $93.50. Everyone enrolled in the routine health services of Medicare this year pays $88.50 a month. The deciding of payments by income, which is being phased in over three years, was enacted in a 2003 Medicare law and will begin in 2007.

“We will be able to serve more people for a longer period if we have at least modestly more limited overall subsidies for our highest-income beneficiaries,'' Mark McClellan, the administrator of the Centers for Medicare and Medicaid Services, said in a conference call.

The modest rate increase will allow the 38 million-plus seniors, enrolled with Medicare to keep more of their monthly Social Security checks, since the Medicare premiums usually are withheld from those payments.

"For the vast majority of beneficiaries, the amount of the Social Security cost-of-living increase will be substantially greater than the additional (Medicare) premium they will pay," McClellan said.

The higher premiums charged to wealthier Medicare beneficiaries may prompt about 9,000 to drop out of the program this year, and 30,000 by 2010.

“We expect to have very broad participation in Medicare continuing,'' McClellan said. “People who might drop out temporarily are probably going to come back in and make up their premium payments when they need services.''