healthcarememo - To Senator John Kerry From Name PPS114...

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To: Senator John Kerry From: Name, PPS114, Fall Date: 10/21/11 Medicare Income Based Premiums and the Budget Control Act As part of the Joint Select Committee on Deficit Reduction you were charged with finding at least $1.5 trillion in savings as part of the Budget Control Act. More recently, your committee has been given the task of furthering this cost reduction in order to help pay for the American Jobs Act. With this goal in mind, president Obama has provided a list of cuts that goes one step further and according to the OMB’s report [1] cuts $3 trillion in net deficits over the next 10 years. In particular, this list contains $580 billion in cuts and reforms to mandatory programs, $320 billion of which is savings on Federal healthcare programs. These savings include many price alignments that do not affect the healthcare recipients directly, but among the parts that do affect the beneficiaries directly is a measure to increase income-related premiums under Medicare Parts B and D. According to the OMB report [1] , this provides for $20 billion of savings over the span of 10 years. Ultimately, I agree with the income-based premium proposal as it takes a step in the right direction of deficit reduction. Furthermore, by increasing financing through premiums this proposal simultaneously provides for a healthier Medicare system, while not significantly affecting, nor compromising enrollment in the program. Medicare Parts B and D as it Exists Today An important point to note is that both Parts B and D of Medicare are optional. According to Kaiser Family Foundation [2] (KFF hereafter), Medicare Part B (The Supplementary Medical Insurance) helps pay for preventative care, outpatient care, physician visits, among many other services. Medicare Part D, on the other hand, provides prescription drug benefits specifically. As Figure 1 shows, both parts are funded, to a large extent, first, by general government revenue
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and, then, by beneficiary premiums. According to KFF the monthly premium for Part B was about $110 in 2010. The premiums are income-based and beneficiaries with incomes greater than $85,000 for a single person, or $170,000 for a couple, pay a higher rate, ranging from $154.70 to $353.60. According to the same report, approximately 5% of all Medicare beneficiaries qualified for the income-related premiums in 2010. Figure: 1 [3] Medicare Part D, on the other hand, has a more complicated premium system. Because it is offered through private plans, the premiums and cost sharing is not uniform across beneficiaries. For instance, the premiums ranged anywhere from less than $9 to more than $120
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This note was uploaded on 02/28/2012 for the course UNITED STA US11 taught by Professor Prof. during the Fall '11 term at Harvard.

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healthcarememo - To Senator John Kerry From Name PPS114...

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