Medicare | Medicare Part B Premiums To Rise 13.2% Next Year,
Officials Announce...a wrapup from Kaiser Foundation
[Sep 19, 2005]
The monthly
premium for Medicare Part B, which pays for physician visits and
some outpatient hospital services, in 2006 will increase by $10.30
to $88.50, CMS
officials announced Friday, the
AP/San
Francisco Chroniclereports (Freking,
AP/San Francisco Chronicle,
9/16). The current premium is $78.20 monthly, while it was $66.60 in
2004 and $58.70 in 2003 (Pear,
New York
Times, 9/17). Under federal
law, Medicare Part B premiums must cover 25% of Part B costs, while
taxpayers pay the remaining 75% (Pugh,
Knight
Ridder/Contra Costa Times,
9/17). The 13.2% increase for 2006 is approximately in line with CMS
actuaries' predictions in April. In a news release, CMS attributed
the increase to rapid growth in physician office visits, use of
laboratory tests and other medical services and hospital outpatient
services (CQ
HealthBeat, 9/16). The
volume of physician services increased 6.3% last year and is
expected to increase 5.6% this year. Use of hospital outpatient
services has increased at a similar rate (AP/San
Francisco Chronicle, 9/16). A
requirement to increase assets in the Part B trust fund also
contributed to the increase, CMS officials said (CQ
HealthBeat, 9/16). In addition,
part of the increase is attributable to higher payments to Medicare
HMOs, according to the
New York Times
(New York Times,
9/17). The deductible for Medicare Part B will increase from $110
this year to $124 in 2006, the
Wall Street Journal
reports. The deductible increase was required in
the 2003 Medicare law. In addition, the deductible for a hospital
stay of 60 days or less will increase $40 to $952 in 2006 (Lueck,
Wall Street Journal,
9/17). CMS said in a statement that many beneficiaries will have
lower out-of-pocket costs in 2006 because of increased coverage
under the new prescription drug benefit. The statement also said
that financial assistance provided for in the new prescription drug
benefit means about 25% of Medicare beneficiaries in 2006 will pay
little or no premium for either Medicare Part B, the new drug
benefit, or both (CQ
HealthBeat, 9/16).
Reasons Behind Increased
Use of Services
According to Knight
Ridder/Times, it is unclear why
Medicare is paying more overall for services. Some experts attribute
the increased spending to an "overall improvement in the quality of
care" or an increased use of services by doctors who practice
"defensive medicine" to protect themselves against malpractice
lawsuits (Knight
Ridder/Contra Costa Times, 9/17).
Doctors also attribute much of the increase in Medicare spending to
research breakthroughs, new treatments and technology that have been
approved for coverage, and efforts to encourage cancer and diabetes
screenings. J. James Rohack, a trustee at the American Medical Association,
said physicians are reducing hospital costs by seeing patients more
frequently to manage chronic conditions such as diabetes and
congestive heart failure (New
York Times, 9/17).
Kuhn Comments
Herb Kuhn, director of the Center for Medicare Management,
said CMS is working to understand "how much value" is resulting from
the increased spending on services (AP/San
Francisco Chronicle, 9/16). He
added, "Medicare needs to move away from a system that pays simply
for more services, regardless of their quality or impact on
beneficiary health" (New
York Times, 9/17). Kuhn said,
"Simply adding larger payment updates to the current system would
not only be expensive but from a standpoint of promoting more
efficient and better quality care, this is not going to get us
there." The increased use of services combined with the new Medicare
prescription drug benefit that begins in 2006 has caused "major
concern" at CMS about the cost of Medicare (Knight
Ridder/Contra Costa Times, 9/17).
Impact on Physician
Payments
According to CQ
HealthBeat, the increased premium
might "complicate prospects for an increase in Medicare physician
payments since any increase in what Medicare pays physicians would
increase Medicare Part B premiums even further" (CQ
HealthBeat, 9/16). The premium
increase was calculated assuming no change in current law (New
York Times, 9/17). However, doctors
are lobbying Congress to reverse a 4.3% reduction in Medicare
physician payments scheduled for 2006 (CQ
HealthBeat, 9/16). If Congress
reversed the cut, Medicare spending on physician services would
increase more than anticipated, likely further driving up premiums
in 2007, CMS Chief Actuary Richard Foster said (Knight
Ridder/Contra Costa Times, 9/17).
Kuhn said, "We need to be sure [doctors are] adequately compensated
for participating in this program, but how we pay them also matters.
The current system clearly is not sustainable" (Wall
Street Journal, 9/17). According to
the New York Times,
the Bush administration has endorsed a pay-for-performance Medicare
physician payment system and is working to develop quality
incentives to implement such a system.
Reaction
Grace-Marie Turner, president of the Galen Institute,
said the premium increase announcement likely will "create a
political firestorm." She added, "Some areas of the country are
seriously overusing health care. Everyone winds up paying the price
for that. ... Consumers need more incentives and more power to
manage the costs of their care." Sen. Jeff Bingaman (D-N.M.), who
introduced a bill that would reduce Medicare payments to private
plans and use the savings to cut beneficiaries' premiums, said,
"With home heating prices expected to rise this winter, many seniors
will find it very hard to absorb the higher premium" (New
York Times, 9/17). Bill Vaughan, a
senior policy analyst for Consumers Union,
said the premium increase is "another wake-up call for the need to
get a handle on runaway health inflation." He added that increased
use of certain services "must be slowed to keep millions of seniors
from sliding toward poverty. Proposals to further increase Part B
costs need to be offset with savings in these high-tech services,
many of which are more profitable than useful to patients" (CQ
HealthBeat, 9/16). Kirsten Sloan, a
health policy analyst at AARP,
noted that the Medicare Part B premium is increasing by about $30
per month from 2003 to 2006. She added that any savings to
beneficiaries resulting from the new prescription drug benefit
"could be eroded by increases in premiums, deductibles and
copayments elsewhere in the Medicare program" (New
York Times, 9/17).
Related News
Los Angeles Times:
The Los Angeles Times on
Saturday examined how a federal policy that Medicare
beneficiaries' Social Security numbers be printed on their
Medicare cards could open them up to identity theft. According
to the Los
Angeles Times,
CMS issues "more cards with Social Security numbers than any
other agency except for Social Security." The Government
Accountability Office
and the Federal Trade
Commission
could not estimate how many instances of identity theft might be
linked to the use of Social Security numbers on
government-issued cards, but critics are lobbying Congress to
approve legislation that would require Medicare to stop issuing
cards with the numbers beginning Jan. 1, 2006. CMS spokesperson
Peter Ashkenaz said Medicare officials are aware of the privacy
concerns but noted that there are no plans to issue cards with
different numbers, in part because the cost would be about $100
million and would require changing the agency's computer systems
(Kristoff, Los Angeles Times,
9/17).
Philadelphia Inquirer:
The Inquirer on Sunday
examined the "weighty question" of "[h]ow much profit" from the
new Medicare drug benefit will "flow" to the prescription drug
industry. According to the Inquirer,
estimates range from $139 billion to "a tiny fraction of that
amount," depending on how many beneficiaries enroll and what
kind of discounts and premiums will be available. Analysts say
the companies that are most likely to see a profit in the
initial stages of the new benefit are manufacturers of generic
drugs and brand-name medications for low-income and elderly
patients covered as dual eligibles (Ginsberg, Philadelphia Inquirer,
9/18).