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Small Percent of Medicare Part B Enrollees Pay Higher Income-Related Premiums

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Joe Albanese
Senior Policy AnalystatParagon Health Institute

Joe Albanese is a Senior Policy Analyst with Paragon Health Institute. He comes to Paragon with over six years of federal and nonprofit public policy experience.

Drew Gonshorowski
Senior Research FellowatParagon Health Institute

Drew Gonshorowski is a Senior Research Fellow at Paragon Health Institute. He brings a decade of experience conducting quantitative research and building models examining health policy and entitlement programs.

All Americans who are 65 or older or who meet certain disability or health criteria are entitled to Medicare coverage. The highest-income enrollees pay more for their Part B (outpatient and physician coverage) and Part D (prescription drug) coverage. But this means-testing is very limited. As a result, wealthier enrollees continue to receive significant taxpayer subsidies for their coverage.

The figure above shows that only 7 percent of Medicare beneficiaries were required to pay higher Part B premiums in 2023. Of all Medicare Part B enrollees, 93 percent paid the “standard premium”–equal to $164.90 per month in 2023.  Individuals in this tier made $97,000 or less in 2021 ($194,000 for joint filers). The share of enrollees paying an extra $65.90 a month plummets to 2.6 percent (incomes of $97,001 to $123,000 for individuals and $194,001 to $246,000 for couples) in the first means-testing tier and the highest tier only accounts for 0.2 percent of enrollees (incomes of $500,000 or more for individuals and $750,000 or more for couples).

A key feature in the design of Part B is that premiums only cover about a quarter of the cost, with taxpayers picking up three-quarters of the cost. The taxpayer share has significantly increased over time as initially enrollee premiums covered about 50 percent of expected Part B costs. This means that taxpayers are largely subsidizing Part B costs – including coverage for wealthier enrollees.

Medicare’s high and growing costs represent the nation’s primary fiscal challenge. Program expenditures are increasing due to the growth in health care costs and a growing number of retirees. The ratio of workers paying taxes into the program versus those receiving benefits is shrinking. Beneficiaries receive far more in Medicare benefits than they pay in premiums and payroll taxes. Paragon has recommended numerous bipartisan policies to reduce Medicare’s costs without cutting benefits. But reducing taxpayer subsidies for wealthier beneficiaries is another bipartisan idea that would improve the program’s finances and make the program less reliant on general revenue.

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