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Medicare Offers Smallest Rise in Premiums in 6 Years

Deductibles will climb, too, however

MONDAY, Oct. 1 (HealthDay News) -- Medicare's standard monthly premium is rising to $96.40 in 2008 -- a 3.1 percent increase from 2007 and the smallest hike in six years, U.S. health officials announced on Monday.

The increase is lower because the agency fixed an accounting error that would have raised the monthly premium even more.

"In the absence of the accounting error, we would probably have an increase in the premium to about $99," Rick Foster, the chief actuary U.S. Centers for Medicare & Medicaid Services (CMS) said during a late morning teleconference. "That's largely a onetime impact," he stressed.

Medicare's Part B program covers the health care of 43 million senior and disabled people. Rising costs and increasing participation have dramatically increased the program's costs in recent years, however.

Deductibles are rising, too. The average deductible for Part B rose from $131 in 2007 to $135 in 2008, the agency said.

The deductible for Medicare Part A is also increasing in 2008, agency officials said. "The deductible paid by the beneficiary when admitted to the hospital will increase from $992 to $1,024," Kerry Weems, CMS's acting administrator said during the teleconference.

Medicare's Part A program covers hospital and hospice care as well as short stays in nursing homes. Participants covered by this program do not pay a monthly premium.

The reasons for next year's premium increase are manifold and include the rising cost of items such as home health care, physician-administered drugs, ambulatory surgical center services, medical equipment, doctor's office lab services and other services and programs, Weems said.

In addition, Medicare is hiking premiums for those making $80,000 a year or more. This increase affects 5 percent of people with Part B coverage, according to Weems.

He noted that the boost in premiums is also tied to the necessity of raising Medicare Part B's contingency trust fund, which stockpiles money to pay for unexpected costs.

Increasing the fund is needed to offset increased doctor's fees, Weems said. While doctors fees charged to Medicare were expected to fall by 10 percent in 2008, Weems said he expects Congress will block that scheduled fee reduction.

Therefore,"it is appropriate to maintain a larger Part B contingency reserve than would otherwise be necessary," Weems explained.

He believes that Medicare recipients are still getting more benefits than they have ever gotten before. "The cost of the new drug benefit has come in far lower than previously projected," he said. "Medicare recipients are paying far lower out-of-pocket costs for drugs and seeing better coordinated care," Weems said

One expert was upbeat about the announcement.

"The relatively small increases underscore what an efficient national treasure Medicare is," said Robert Hayes, the president of the the Medicare Rights Center, a New York City-based advocacy group. "The economies of Medicare cry out for its use as a model to cover people who are uninsured throughout the country," he added.

Seniors may still be in for some fiscal surprises in 2008, however. In a study released Monday, experts at Consumer's Union (the publisher of Consumer Reports) warned that most insurers bump up the prices for drugs covered by the Medicare Part D drug benefit -- after enrollees have already committed to a particular plan.

"It makes no sense to ask a senior to carefully shop around [for a plan] in October and sign up for a plan, when the plan turns around a few months later and dramatically hikes the cost of the medicines," Bill Vaughan, senior health policy analyst at Consumers Union, said in a statement.

Tracking the period from February to September 2007, the group found that 95 percent of plans offered in the regions sampled raised their drug costs. In the most extreme case, Blue Medicare RX-Standard in Illinois hiked the cost of five widely used drugs by 28 percent, or $679, the report found.

More information

For more on Medicare premiums, visit the Medicare.

SOURCES: Oct. 1, 2007, teleconference with Kerry Weems, acting administrator, Rick Foster, chief actuary U.S. Centers for Medicare & Medicaid Services; Robert Hayes, president, Medicare Rights Center, New York City; Oct. 1, 2007, news release, Consumers Union

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