Sept. 16, 2005- Medicare today announced the
premiums to be paid by beneficiaries in 2006. The most closely watched
monthly premium, Medicare Part B, will be $88.50 in 2006, an increase of
$10.30 from the 2005 premium of $78.20. This is a 13.2 percent jump, but
much less than the 17.4 percent increase this year. The bottom line is
that senior citizens in Medicare will be facing this premium plus a new
monthly premium for the new prescription drug program (Part D) that is
expected to average $32 monthly, as well as, the deductibles for Parts
A, B and D.
Though premiums are rising, most Medicare
beneficiaries will see significantly lower out-of-pocket health care
costs in 2006, because of the savings in drug costs from the new
Medicare prescription drug benefit, says the premium announcement.
Also, about one-fourth of beneficiaries can receive
assistance that pays for their entire Part B premium, and about
one-third of beneficiaries can receive assistance for their Part D
premium.
The average Part D monthly premium will be $32,
about 14 percent lower than had been projected, with plans in virtually
all areas of the country available for a premium of under $20 or even
less. The drug benefit will provide help with prescription drug costs
that for many beneficiaries will exceed the premium cost. On average,
the prescription drug benefit will reduce prescription drug costs for
the beneficiaries who now have no drug coverage by many hundreds of
dollars.
Additional Details on
Other Announced Premiums and Deductibles
Part B Deductible
background: The Part B deductible
was increased to $110 in 2005 and was subsequently indexed to
the increase in the average cost of Part B services for aged
beneficiaries, as part of the Medicare Modernization Act. The
reason for the increase in the average cost of Part B services
was described above. In 2006, the Part B deductible will be
$124, compared to $110 in 2005.
Part A Deductible
background: Medicare Part A pays
for inpatient hospital, skilled nursing facility and some home
health care. The $952 deductible, paid by the beneficiary when
admitted as a hospital inpatient, is an increase of $40 from
$912 in 2005. The Part A deductible is the beneficiary’s only
cost for up to 60 days of Medicare-covered inpatient hospital
care in a benefit period. Beneficiaries must pay an additional
$238 per day for days 61 through 90 in 2006, and $476 per day
for hospital stays beyond the 90th day in a benefit period.
This compares with $228 and $456 in 2005.
Part A Premium
background: About 99 percent of
Medicare beneficiaries do not pay a premium for Part A services,
since they have at least 40 quarters for Medicare-covered
employment. However, other seniors and certain people under age
65 with disabilities who have fewer than 30 quarters of coverage
may obtain Part A coverage by paying a monthly premium set
according to a statutory formula. This premium will be $393 per
month for 2006, an increase of $18 from 2005. In addition,
seniors with 30 to 39 quarters of coverage, and certain disabled
persons with 30 or more quarters of coverage, will pay a premium
of $216 in 2006, compared to $206 in 2005.
In addition, more beneficiaries than ever have
Medicare Advantage plans available to them. These plans will generally
offer additional coverage at a lower cost than the standard Medicare
drug benefit in 2006, as well as additional benefits and reduced
copayments for Medicare-covered services. On average, these plans save
beneficiaries around $100 a month compared to enrollment in
fee-for-service Medicare.
Medicare Premiums and Beneficiary Out-of-Pocket
Costs in 2006
The Medicare Part B premiums and deductibles apply
to all Part B beneficiaries, but other factors including Medicare’s new
prescription drug benefit will provide additional help with out of
pocket costs in 2006.
Beneficiaries with incomes below 135 percent of
poverty and limited resources are eligible for subsidies that pay for
some or all of their Medicare premiums. As a result, about one in four
Medicare beneficiaries can get extra assistance that enables them to pay
little or no premium for Part B, Part D, or both, next year. This would
include most beneficiaries living on incomes that come only from a
monthly Social Security check. Also, many beneficiaries with incomes
between 135 percent and 150 percent of poverty can get partial
assistance with their Part D premiums. Overall, about one-third of
beneficiaries can qualify for Part D premium assistance.
By law, the Medicare Part B premium increase may
not exceed any beneficiary’s cost of living adjustment in their Social
Security check. For the great majority of beneficiaries, the amount of
the Social Security cost of living increase will be much greater than
the additional premium they will pay.
In 2006, out-of-pocket costs for many Medicare
beneficiaries will also be reduced significantly by the new Medicare
prescription drug benefit. The average Part D monthly premium will be
$32, about 14 percent lower than had been projected, with plans in
virtually all areas of the country available for a premium of under $20
or even less. The drug benefit will provide help with prescription drug
costs that for many beneficiaries will exceed the premium cost. On
average, the prescription drug benefit will reduce prescription drug
costs for the beneficiaries who now have no drug coverage by many
hundreds of dollars.
In addition, more beneficiaries than ever have
Medicare Advantage plans available to them. These plans will generally
offer additional coverage at a lower cost than the standard Medicare
drug benefit in 2006, as well as additional benefits and reduced
copayments for Medicare-covered services. On average, these plans save
beneficiaries around $100 a month compared to enrollment in
fee-for-service Medicare.
Information on these and other programs that can
help beneficiaries lower their out-of-pocket costs is available at
1-800-MEDICARE (1-800-633-4227), and for hearing and speech impaired at
TTY/TTD: 1-877-486-2048.
Reasons for Increase in Part B Premium
The new Part B premium is only slightly higher than
what CMS actuaries predicted in the Medicare Trustees’ Report issued in
March ($87.70 at that time). In a subsequent March 31, 2005 The table
attached to this Fact Sheet summarizes the factors contributing to the
premium increase.
The most important single factor, accounting for
most of the 9.9 percent increase in total Part B benefit payments, is
rapid growth in the volume and intensity of Part B services. The table
below provides more information on why the growth in volume and
intensity is having an important impact on Part B spending. It shows
the increases in the volume and intensity of services for the two
largest components of Part B, physicians’ services and outpatient
hospital services. Growth in spending for these two services account for
most of the increase in total Part B benefit payments (spending growth
for these services also contributes to the increase in Medicare
Advantage payments, as noted below).
Percent Increase in Volume/Intensity
Percent Increase in
Volume/Intensity
2002
2003
2004
2005 Est.
2006 Est.
Physicians’
Services
6.3
4.6
6.3
5.6
6.4
Outpatient Hospital
Services
3.5
2.5
6.8
6.6
3.8
Because of the growth in volume and intensity of
services, the 2005 estimates of the growth in volume and intensity of
physician and hospital outpatient services are now 5.6 percent and 6.6
percent, respectively. These estimated increases are greater than they
were projected to be last year. Similarly, the rapid actual growth has
led to higher projected utilization growth for 2006 than had previously
been the case. In turn, this results in higher expected Part B spending
and higher premiums.
For physicians’
services, increases in utilization and intensity during 2004 were 6.3
percent, and are estimated to be 5.6 percent for 2005 and projected to
be 6.4 percent for 2006. These figures are much higher than the average
utilization and intensity increase of about 1 percent per year between
1992 and 1999, and reflect an upward trend since 2000. This continued
growth in the volume and intensity of physicians’ services has resulted
in a high projected growth in spending for these services in 2006, which
is a principal factor contributing to the increase in the 2006 Part B
premium.
