Medicare Part B premiums to rise 5.6% next year

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Sep 14 2006

The standard monthly premium for Medicare Part B in 2007 will increase to $93.50 from $88.50, CMS Administrator Mark McClellan announced on Tuesday, the Washington Post reports.

CMS officials said that the 5.6% increase in the monthly premium is the smallest since 2001 (Lee, Washington Post, 9/13). The monthly premium includes calculations of a scheduled 5% reduction in Medicare physician reimbursements in 2007, "but Congress has reversed such cuts four years in a row," the Wall Street Journal reports. McClellan said that, in the event Congress reverses the scheduled reduction in Medicare physician reimbursements, the monthly premium would increase by $1.50. CMS officials earlier this year estimated that the monthly premium in 2007 would increase to $98 and on Tuesday attributed the smaller increase to physicians "filing claims faster and getting paid more quickly," the Journal reports (Zhang, Wall Street Journal, 9/13). Higher-income beneficiaries in 2007 for the first time will pay a higher monthly premium than other beneficiaries, as ordered by a provision in the 2003 Medicare law. Under the provision:

Individuals with annual incomes between $80,000 and $100,000 and married couples with annual incomes between $160,000 and $200,000 in 2007 will pay a monthly premium of $106;
Individuals with annual incomes between $100,000 and $150,000 and married couples with annual incomes between $200,000 and $300,000 in 2007 will pay a monthly premium of $124.70;
Individuals with annual incomes between $150,000 and $200,000 and married couples with annual incomes between $300,000 and $400,000 in 2007 will pay a monthly premium of $143.40; and
Individuals with annual incomes of $200,000 or more and married couples with annual incomes of $400,000 or more in 2007 will pay a monthly premium of $162.10 (Pugh, Miami Herald, 9/12).

McClellan said that the means testing will reduce Medicare costs by $7.7 billion over five years and $20 billion over 10 years (Appleby, USA Today, 9/13). CMS officials estimated that means testing will prompt 9,000 higher-income Medicare beneficiaries to leave the program in 2007 and 30,000 to leave by 2010 (Washington Post, 9/13).

McClellan Comments

"Most Medicare beneficiaries will see relatively modest cost increases compared with recent health care trends," McClellan said (USA Today, 9/13). McClellan said "a modest slowdown in physician spending growth" contributed to the smaller increase in the monthly premium, but he raised concerns about "very rapid growth in spending for hospital outpatient services." McClellan that said many services provided in outpatient hospital clinics "could be performed less expensively and more conveniently in a physician's office." In addition, McClellan said that means testing will have "a very positive impact, making Medicare more sustainable in the long term."

Reaction

Kirsten Sloan, a health policy analyst for AARP, said, "The standard premium for Part B is less than originally projected, and that's good news. But the premium is artificially low." Sloan said the monthly premium "assumes a continuation of current law, under which Medicare payments to doctors will be cut 5% next year," adding, "If Congress decided to prevent that cut, beneficiaries may have to make up the difference by paying higher premiums in 2008" (Pear, New York Times, 9/13). Shannon Benton, executive director of Senior Citizens League, said, "As healthier and wealthier seniors see their premiums rise, we fear that when that premium equals what they could pay for regular health insurance, why be in the program at all?" Benton added, "We feel that eventually the sickest, the oldest and the poorest are going to be the ones left behind in Medicare, and their costs are going to go up significantly to sustain the program" (Washington Post, 9/13). Medicare Rights Center President Bob Hayes said, "I have no doubt that creative insurance companies will seize the opportunity to pick off wealthy, healthy, younger people from Medicare. Of course, those companies will send them back to Medicare when they get older and sicker" (Hundley, St. Petersburg Times, 9/12). Joe Antos of the American Enterprise Institute said, "The difficult balance is finding the spot where we're charging higher-income people more but not so much more that they will simply drop out of the program" (USA Today, 9/13).

NPR's "Morning Edition" on Wednesday reported on the increase in the monthly premium. The segment includes comments from Hayes and McClellan (Silberner, "Morning Edition," NPR, 9/13). The complete segment is available online in RealPlayer.

This article was reprinted from khn.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.