A glimmer of good Medicare news

at 12:53 PM ET, 10/27/2011

A glimmer of good Medicare news from the White House this morning: Monthly premiums for Part B, which covers doctors visits for the elderly, will be lower than projected next year.  

Most seniors will see a $3.50 bump in their monthly premiums in 2012, from $96.40 up to $99.90. That’s lower than the $106 premium that the Medicare Trustees Report had projected in May. About a quarter of Medicare beneficiaries, particularly those who are newer enrollees and have higher income (and had been paying higher premiums), will actually see a reduction in their monthly payments.

This is the third piece of good Medicare news that the administration has rolled out this year. Earlier, the White House announced decreases in the average premiums for Medicare’s prescription drug plan as well as for Medicare Advantage, the managed-care alternative to traditional fee-for-service coverage. All of this unfolds as employer-based health insurance premiums have increased 9 percent this year.

What to take away from this? We have increasing evidence that, on a per beneficiary basis, Medicare cost growth is slowing. Here’s how that looks in a chart from the S&P Health Care Economic Indices, which tracks per-unit cost growth in various health care sectors:

As of last month, the S&P Medicare Index was growing at 2 percent, just about a quarter of its peak growth of 8 percent in November 2009.

In a call with reporters, Center for Medicare and Medicaid Services administrator Don Berwick attributed the reduced cost growth to seniors using fewer services. “We’re seeing utilization trends that are favorable,” he said.

And if you look at the demographics of Medicare right now, that makes sense. As a wave of baby boomers age into Medicare, the population skews younger and, in aggregate, becomes healthier, at least for the time being. There’s also some thought in health policy circles that the recession has reduced how much health care people use as they try to avoid the associated fees, like co-pays and deductibles, that can come along with treatment.

Today’s announcement, however, doesn’t mean we’re in the clear on Medicare spending. The young enrollees who have lower medical costs now are likely to require more care as they age. So a decade or two down the line, the same factors that are helping Medicare now could cause the program some financial hurt.

 
Read what others are saying

    Most Read: Business

    DJIA
    0.07%
    S&P 500
    0.28%
    NASDAQ
    0.61%
     Last Update: 09:21 AM 11/27/2014

    World Markets from      

     

    Other Market Data from      

     

    Key Rates from