Premium for Basic Medicare Increasing 13% Next Year

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September 17, 2005Premium for Basic Medicare Increasing 13% Next Year By ROBERT PEARWASHINGTON, Sept. 16 - The Bush administration announced on Friday thatthe basic Medicare premium would shoot up next year 13 percent, to$88.50 a month, mainly because of the increased use of doctors'services.Many beneficiaries will pay an additional premium for the newprescription drug benefit, expected to average $32 a month. So thecombined premiums for doctors' services, outpatient hospital care andprescription drugs will average slightly more than $120 a month.Medicare provides coverage for 42 million people who are 65 and older ordisabled. In most cases, Medicare premiums are deducted from monthlySocial Security checks. The average monthly Social Security benefit forretired workers is $955 this year. The amount for 2006 will be announcednext month and will probably approach $1,000. Kirsten A. Sloan, a health policy analyst at AARP, the big lobby forolder Americans, noted that the basic Medicare premium was increasing bynearly $30 a month, or 51 percent, from 2003 to 2006.Doctors are billing Medicare for longer, more intensive office visits,more laboratory tests and more frequent and complex imaging procedures. But doctors said that much of the increase in Medicare spending alsoresulted from research breakthroughs, new drugs and technology approvedfor coverage and cancer and diabetes screenings encouraged by thegovernment. The 2006 premium will be $10.30 more than the current monthly premium.The premium, now $78.20 a month, is calculated according to a complexformula set by law. The premium was $66.60 in 2004 and $58.70 in 2003.Herb Kuhn, a senior official at the federal Centers for Medicare andMedicaid Services, expressed concern about the growth in spending ondoctors' services, laboratory tests and outpatient procedures."Medicare needs to move away from a system that pays simply for moreservices, regardless of their quality or impact on beneficiary health,"Mr. Kuhn said. "The current system is not sustainable."The Bush administration has endorsed the idea of "pay for performance"and is searching for ways to measure doctors' performance in treatingMedicare patients.Mr. Kuhn said he did not know how much of the increase in Medicarespending might be for unnecessary care. "We're still trying to understand how much value we're getting forthat," he said.The chief Medicare actuary, S. , said the premiums paid bybeneficiaries covered one-fourth of the cost of benefits under Part B ofMedicare. Those benefits include the services of doctors and otherhealth care professionals, X-rays, diagnostic tests, some home healthservices and drugs given to patients in doctors' offices.Grace-Marie , president of the Galen Institute, a research centerthat advocates free-market health policies, predicted that the premiumincrease would "create a political firestorm.""Some areas of the country are seriously overusing health care," Mrs. said. "Everyone winds up paying the price for that. What do youdo? Put more price controls into the Medicare program? That clearly hasnot worked. Consumers need more incentives and more power to manage thecosts of their care."Dr. J. Rohack, a trustee of the American Medical Association, saiddoctors were saving money for Medicare by keeping patients out of thehospital. To do that, Dr. Rohack said, physicians have to see patientsmore frequently to manage aggressively chronic conditions like diabetesand congestive heart failure.Moreover, Dr. Rohack said, many beneficiaries will have lowerout-of-pocket health costs next year because of the added drug coverage. "Even though the premium for Part B of Medicare is going up, manypatients will see net savings of hundreds of dollars a month," said Dr.Rohack, a cardiologist in Temple, Tex., whose patients often spend $300to $400 a month on medications.Ms. Sloan of AARP agreed that "there will be savings from the drugbenefit." But she added, "Those savings could be eroded by increases in premiums,deductibles and co-payments elsewhere in the Medicare program."Under federal law, low-income people are eligible for extra help. "About one-fourth of beneficiaries can receive assistance that pays fortheir entire Part B premium," Mr. Kuhn said.Many people eligible for the help do not receive it, because they areunaware it exists, are reluctant to apply for it or find applying toodifficult.Beneficiaries have to pay annual deductibles before Medicare pays fordoctors' services. The deductible, $100 a year from 1991 to 2004,increased to $110 this year and will go to $124 in 2006.Higher Medicare payments to health maintenance organizations and otherprivate plans are also contributing to the higher premiums. The government often spends more for a beneficiary in a private planthan it would for the same person in traditional fee-for-serviceMedicare. Federal officials expect that more people will enroll inprivate plans next year, in part because such plans offer extrabenefits, including more generous drug coverage than the standard drugbenefit.Many Democrats object to what they describe as overpayments to privateplans. Senator Jeff Bingaman, Democrat of New Mexico, recentlyintroduced a bill that would cut Medicare payments to private plans anduse the savings to reduce premiums for beneficiaries."With home heating prices expected to rise this winter, many seniorswill find it very hard to absorb the higher premium" in 2006, Mr.Bingaman said Friday. "Rather than charging higher premiums, I wouldlike to see deep cuts in the overpayments to H.M.O.'s."The new premium was computed on the assumption that current lawcontinues unchanged. Because of a quirk in the law, doctors face a 4.4percent cut in the Medicare payment next year for each service theyprovide. Doctors are lobbying Congress to block the cut and to allow amodest increase in the fees. If Congress does so, Medicare spending ondoctors' services will rise more than expected, and that will, in turn,drive up premiums more than expected in future years. Copyright 2005 The New York Times