Supporters and opponents of health-care reform differ over whether the measure will ultimately bolster -- or undermine
-- Medicare.
In the short run, this much is clear: As soon as 2011, people enrolled in the federal health insurance program for those
65 and older will see an expansion of benefits. But upper-income participants should prepare for higher premiums and, in some
cases, higher taxes, too.
For Medicare recipients, the new law expands benefits in two ways. The first concerns preventative care. Currently, Medicare
recipients are entitled to one covered physical examination within 12 months of enrolling in the program. After that, they
must pick up the tab for this service.
But starting in 2011, Medicare will pay 100% of the cost of routine annual physicals. It also will completely cover the
cost of preventative services such as glaucoma screenings for certain individuals, mammograms, pap smears and hepatitis B
vaccines, according to the nonprofit Medicare Rights Center.
The legislation also does away with a gap in coverage under Medicare's Part D plans, which cover prescription medications.
Under Part D, most participants pay monthly premiums. In return, these plans cover 75% of the cost of prescription drugs,
leaving the participant to pick up 25%.
But after the total cost of a participant's drugs reach a set amount per year -- generally $2,830 in 2010 -- he or she
falls into a coverage gap known as the "doughnut hole." Once there, a participant is on the hook for 100% of the cost of his
or her medications, generally up to $6,440 in total drug costs. At that point, catastrophic coverage kicks in, limiting participants'
outlays, typically to 5%.
An estimated 14% of Medicare Part D participants fall into the doughnut hole. But under the new health-care legislation,
this gap will gradually disappear.
In 2010, participants who fall into the doughnut hole will receive a $250 rebate. Starting in 2011, they will instead receive
manufacturers' discounts and government subsidies on their medications. These discounts and subsidies will gradually reduce
the portion of drug costs that individuals in the doughnut hole pay -- to 25% in 2020 from 100% today. (The discounts and
subsidies will phase in at different rates depending on whether a medication is a brand name or generic drug.)
For some Medicare recipients, the health-care legislation also will impose higher costs. Starting in 2011, individuals
earning more than $85,000 a year -- and couples earning more than $170,000 -- will pay higher premiums for Part D coverage.
(While premiums are standardized under Medicare Part B, which covers doctor visits, premiums under Part D vary from plan to
plan.)
Others will be hit with tax increases. In 2013, individuals of any age with adjusted gross income over $200,000 a year
-- and couples with more than $250,000 -- will pay an additional 0.9% in Medicare payroll tax. The same group will pay a 3.8%
Medicare tax on investment income, including interest, dividends and capital gains.
Write to Anne Tergesen at anne.tergesen@wsj.com
