Applying a Premium Cap in Medicare Part B and Part D

Applying a cap on Part B and Part D Medicare premiums would help low-income people living in America.

The Issue

Medicare enrollees with incomes above 135 percent of the federal poverty line (FPL) do not qualify for federal financial assistance. As a result, enrollees with incomes just above the cutoff line face higher premiums for Medicare Part B and Part D.

Key Findings

• Two national policies could limit the financial burdens of premiums for Medicare enrollees:
  • Cap premiums for Part B and Part D Medicare enrollees at 8.5 percent of income.
  • Use IRA income caps (no premiums for people with incomes up to 150% of FPL) and then increase premiums to 8.5 percent of income for those with incomes above 400 percent of the FPL.
• Under the first policy, 23 million enrollees would receive financial assistance—an increase from the 12.5 million who currently receive assistance.
• Under the second policy, enrollees with incomes below 200 percent of FPL would receive assistance.

Conclusion

Researchers determine that either policy option would significantly help low-income, older people livng in America. Compared with current law, both policies represent a more consistent approach to capping premiums exceeding a specified share of income as people transition to Medicare coverage.

About the Urban Institute

The nonprofit Urban Institute is dedicated to elevating the debate on social and economic policy. For nearly five decades, Urban scholars have conducted research and offered evidence-based solutions that improve lives and strengthen communities across a rapidly urbanizing world. Their objective research helps expand opportunities for all, reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector. Visit the Urban Institute’s Health Policy Center for more information specific to its staff and its recent research.

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