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How the Bipartisan Medicare Deal Will Hurt Retirees

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A recent agreement on a budget deal between Democratic House Minority Leader Nancy Pelosi and Republican House Speaker John Boehner is being heralded as the return of bi-partisanship. The deal, which will soon be voted on, addresses payments to doctors who treat Medicare patients.

“The bipartisan, bicameral bill seeks to end the cycle of annual ‘doc fix’ crises that have created uncertainty for millions of Medicare providers and beneficiaries for over a decade and create a system that promotes higher quality care for America’s seniors,” a release from committee leaders in both parties stated.

This is an issue that has been fixed on a temporary basis 17 times. Congress had to address this because failure to do so would create cuts of 20% or more in payments to doctors treating Medicare patients, according to this story on CNN.com. In fairness, we need to ensure that doctors, the backbone of the health-care system, get their fair payment. As for Congress, the reality is that it will soon be election season and every donation counts.

It all sounds good, but as the article points out, Pelosi also agreed to some structural changes, including some “means testing” for beneficiaries.

Means testing? What’s that?

For the last two years, that’s been a rallying cry for the authors of “What You Don’t Know About Retirement Will Hurt You!,” a book that I contributed to and is published by People Tested Media, a company that I have an ownership stake in.

“Clients had better rethink their retirement planning, especially those who are putting so much emphasis on the timing of taking Social Security and contributing everything to their traditional 401(k) or 403b plans. Remember Part B and any surcharges from this means testing come out directly from your Social Security check,” said Dan McGrath, the book’s lead author. I recently discussed this issue with three of the book’s seven authors.

“It appears that the legislation will expand the number of means testing brackets to nine and have no indexing for inflation until 25% of beneficiaries pay some form of additional Medicare premiums,” Michael Gerali explained.

Gerali added that, “This is why we have placed so much emphasis on the type of income you take in retirement. The ‘doc fix’ will be a bad prescription for those who don’t plan ahead.”

Rob Klein voiced concern that this bipartisan deal “will be sold to the people as something to make the rich pay their fair share. Behind closed doors, some of the politicians see it as a way to save Social Security and pay for Obamacare.”

For Americans, this bipartisan deal might seem to be a good step forward to show that Congress can actually work together. But for retirees, this deal may provide another roadblock in their ability to control and manage their retirement income.

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