From left: House Speaker John Boehner, Senate Majority Leader Mitch McConnell, Senate Minority Leader Harry Reid, and House Minority Leader Nancy Pelosi.AP Photo/Alex Brandon

This article is from the archive of our partner National Journal

The budget deal that passed the Senate early Friday morning prevents Medicare premiums from rising 52 percent for more than a quarter of beneficiaries in 2016—but it also requires those seniors to eventually pay the government back.

At issue was a looming 52 percent spike in Medicare premiums and deductibles that would begin next year for a sizable portion of seniors. Hoping to solve that problem, Congress’ deal will reduce the rate increase while requiring seniors to eventually pay the money the government loses back over time.

And the problem stems from this: About 70 percent of Medicare recipients are “held harmless,” meaning their Medicare premiums are prohibited from increasing more than their Social Security benefit, while the other 30 percent of seniors are not held harmless. Typically, Medicare premiums increase every year as health care costs rise. However, this year, there was no Social Security cost-of-living adjustment, and seniors who are held harmless will have no increase in their premiums. But health care still has to be paid for, and so the increased costs of providing health care to all Medicare recipients would have been shouldered by the seniors who are not held harmless through increased premiums.

The Medicare deal pays for itself by creating a more modest increase in premiums for 30 percent of seniors in 2016, but then adding an additional $3 to those seniors’ monthly premiums until the “loan” from the Federal Treasury to the Supplementary Medical Insurance Trust Fund is paid off. Medicare beneficiaries who currently pay higher income-related premiums—for example, wealthier seniors or those whose premiums are paid by Medicaid—will pay more than an additional $3 a month to repay the loan.

“It’s basically spreading that increase over the next nine years,” said Loren Adler, a research director at the Committee for a Responsible Federal Budget.

The deal came only after significant wrangling. House Minority Leader Nancy Pelosi insisted the fix be included in the budget deal after House leadership failed to address the problem earlier in the month. Pelosi had also brought up the possibility of including the fix in the continuing resolution that passed both chambers in late September, but that never happened.

On Friday, three days before the budget deal was announced, Republicans proposed a package that did not include a Part B fix. Intense negotiations continued over the weekend, and the fix was slipped into the deal by Monday night.

“We’re very pleased to have worked ... on stopping a sharp increase in Medicare Part B payments for our seniors,” Pelosi said on Thursday. “The security of our country, the growth of our economy, the financial stability of our seniors and people with disabilities—for the full faith and credit of the United States of America, we’re very proud.”

Under the budget deal, seniors not held harmless will pay $120 a month, while the majority of beneficiaries will pay the 2015 rate for their coverage, $104.90. Without the deal, premiums for non-held harmless seniors would have spiked to $159.30.

The 30 percent of seniors who are not held harmless include high-income beneficiaries, new beneficiaries, beneficiaries who have not started receiving Social Security, those whose premiums are paid by Medicaid, and certain state and local employees who do not participate in Social Security.

Earlier this month, Sen. Ron Wyden, ranking member of the Senate Finance Committee, introduced legislation that would have held all premiums at $104.90, but it did not include an offset to prevent it from adding to the budget deficit. The bill was cosponsored by 28 Democrats and both independent senators.

Still, Democrats seem pleased with the solution reached in the budget deal: “It’s very good,” said Sen. Debbie Stabenow, a Michigan Democrat. “It basically stops what would have been at least a 50 percent increase in Medicare.”

This article is from the archive of our partner National Journal.

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