The Medicare health insurance program was established in 1965 as a way to ensure senior citizens and people living with disabilities have access to basic healthcare. Medicare Parts A and B represent hospital and medical insurance coverage. Medicare Part B is an optional coverage that requires a monthly premium payment. The history of Part B's premium payment corresponds with increases in healthcare costs over the years.
Medicare Program Funding
The Medicare health insurance program was set up to work hand-in-hand with the U.S. Social Security System. This made it possible to fund Medicare using Social Security payroll deductions taken from workers' income, according to the University of Maryland School of Law. And while Medicare Part A is provided at no cost, Part B premiums are either pulled from a Medicare participant's Social Security income or paid separately on a monthly basis. When the program first started, Part B premium payments were designed to cover 50 percent of the costs to run the Medicare program. This initial Medicare Part B premium amount was set at $3 per month.
COLA Allowances
Cost-of-living allowances---also known as COLA---played a pivotal role in the changes made to Medicare Part B premium amounts and continue to have an effect today, according to the University of Maryland School of Law. Since Part B premiums are deducted from a Medicare participant's Social Security check, Congress enacted legislation designed to prevent Part B premium deductions from exceeding COLA increases within any given year. In 1972, Congress enacted the COLA provision to ensure increases in Part B premium amounts didn't exceed annual cost-of-living adjustments made to Social Security benefits.
Premium Increases
The COLA provisions enacted by Congress in 1972 resulted in Medicare Part B premium payments covering less than 25 percent of the costs for the program as opposed to the 50 percent coverage provided when Medicare started. Meanwhile, healthcare costs continued to rise, causing Medicare revenues to fall at an increasing rate. To counter decreasing revenues, Congress enacted another piece of legislation as part of the Balanced Budget Act of 1997. The act set Medicare Part B premium payments at a permanent rate that covered a minimum of 25 percent of Medicare's program costs. As of 1997, the Medicare Part B premium payment amount was set at $43.80, which accounted for 25 percent of the program's overall costs.
Income Level Effects
The continuing rise in healthcare costs placed an ever increasing strain on Medicare revenues and threatened to bankrupt the program in coming years. In an effort to further generate needed program revenues, Congress passed legislation designed to adjust Part B premium payment requirements according to a person's income level. According to Medicare.gov, the Medicare Modernization Act of 2003 assigned a standard premium payment amount (based on the 25 percent cost model) for individuals with income levels less than $85,000 a year and married couples with less than $170,000 a year. As of 2011, standard Part B premiums for Medicare recipients range between $96.40 and $115.40 a month depending on whether benefits are withheld from a person's Social Security check or paid directly. Monthly premium amounts for those with higher income levels range anywhere from $161.20 to $369.10 based on what income tier a person or couple fall into.
Tags: Medicare Part, Part premium, Social Security, premium payment, Congress enacted, healthcare costs, less than
