Medicare part B premiums to increase by 3.1% in 2008 to $96.40 per month

Oct 2 2007

CMS on Monday announced that the standard monthly premium for Medicare Part B, which covers physician visits and outpatient hospital care, will increase by $2.90, or 3.1%, to $96.40 in 2008 -- the smallest increase since 2000, when the premium remained the same, the New York Times reports.

Most of the 43 million Medicare beneficiaries pay the standard monthly premium. About 5% of higher-income Medicare beneficiaries -- those with annual incomes that exceed $82,000 for individuals or $164,000 for couples -- pay a higher monthly premium on a sliding scale.

According to CMS, individual Medicare beneficiaries with annual incomes that exceed $205,000 and couples with annual incomes that exceed $410,000 will pay a monthly premium of as much as $238.40 in 2008. Individual Medicare beneficiaries with annual incomes between $102,000 and $153,000 will pay a monthly premium of $160.90 in 2008, CMS said. The annual deductible for Medicare Part B will increase from $131 to $135 in 2008, according to CMS (Pear, New York Times, 10/2).

In addition, the annual deductible for Medicare Part A -- which covers inpatient hospital care, hospice care and short stays in nursing homes -- will increase by $32 to $1,024 in 2008. Medicare Part A does not have a monthly premium (Freking, AP/Houston Chronicle, 10/2).

Reasons for Increase
Acting CMS Administrator Kerry Weems attributed the increase in the standard monthly premium for Medicare Part B in part to growth in certain areas of the fee-for-service program (Carey/Reichard,CQ HealthBeat, 10/1). In addition, he cited increased reimbursements to private Medicare Advantage plans and a decline in average health among beneficiaries enrolled in such plans (New York Times, 10/2).

However, the standard monthly premium did not increase by as much as experts expected, in part because CMS officials decided to correct an accounting error -- in which Part B in 2005 began to pay for hospice care covered by Part A -- that would have increased the premium by $2.50 in 2008. In addition, the formula used to calculate the standard monthly premium included a scheduled 10% reduction in Medicare physician reimbursements in 2008, but Congress likely will pass legislation to prevent the reduction, a move that could lead to increases in the premium in future years (AP/Houston Chronicle, 10/2).

Comments
Richard Foster, chief actuary at CMS, said, "The low increase in premiums is good news for 2008" but likely will not continue in future years. David Sloane, director of government relations for AARP, said that increases in the standard monthly premium for Medicare Part B are "eating away at the cost-of-living adjustment" made annually in Social Security payments and that "it is becoming more difficult for older Americans, especially those on fixed incomes, to afford health care" (New York Times, 10/2).

Sloane added, "When the government opened Medicare to private plans, the insurance companies promised their efficiency could provide members with more benefits for less than the cost of Medicare. Now we're paying them too much, and it's driving up costs for taxpayers and all people in Medicare" (Minneapolis Star Tribune, 10/1).

The American Medical Association in a statement said that increased reimbursements to MA plans are "solely to blame" for the increase in the standard monthly premium. According to the statement, "It is outrageous that all Medicare patients are helping subsidize overpayments to private insurance companies, while only one in five Medicare patients participates" in MA plans (Carey/Reichard, CQ HealthBeat, 10/1).

MA Plans
In related news, the number of private fee-for-service and "special needs" MA plans will increase significantly in 2008, according to a report recently released by Avalere Health, CQ HealthBeat reports. The report said that Medicare beneficiaries in 2008 will have access to 506 fee-for-service MA plans, an almost 500% increase from 2006. In addition, Medicare beneficiaries in 2008 will have access to 720 special needs MA plans -- which in most cases enroll beneficiaries who also qualify for Medicaid -- compared with 471 in 2007, according to the report.

According to CQ HealthBeat, the two types of MA plans have faced "skepticism and scrutiny from Congress" because they receive higher reimbursement rates than fee-for-service Medicare for equivalent benefits, but the "fast-growing popularity of the plans could complicate efforts by lawmakers to trim their reimbursement" (Reichard, CQ HealthBeat, 10/1).

New UnitedHealth Medicare Plans
UnitedHealth on Monday announced several new Medicare plans for 2008, Dow Jones reports. The new plans include the only MA plan to have the AARP label and Medicare prescription drug plans with no copayments for generic medications.

In addition, UnitedHealth in 2008 will offer Evercare chronic disease plans in 34 states, compared with seven states in 2007, and will begin to offer such a plan for Medicare beneficiaries with Alzheimer's disease and related dementia in Maricopa County, Ariz. UnitedHealth also will offer Secure Horizons private fee-for-service MA plans in more than 1,600 counties nationwide (Dow Jones, 10/1).