Medicare Premiums To Rise 5.6% in '07

Medicare remains
Medicare remains "a very attractive insurance package," said Mark B. McClellan, administrator of the Centers for Medicare and Medicaid Services. (By Chris Kleponis -- Bloomberg News)
By Christopher Lee
Washington Post Staff Writer
Wednesday, September 13, 2006

Most seniors will have to pay 5.6 percent more for basic Medicare coverage next year, officials announced yesterday. But premiums for more affluent beneficiaries will increase by as much as 83 percent, because the federal government for the first time will require wealthier people to pay more.

The standard monthly premium for Part B, which covers doctor visits and outpatient hospital care, will rise to $93.50 from $88.50 this year, said Mark B. McClellan, head of the Centers for Medicare and Medicaid Services. Individuals with an annual income of more than $80,000 (or more than $160,000 for married couples) will pay monthly premiums of $106 to $162.10, depending on income.

About 1.5 million of the 42 million Americans on Medicare will have to pay the higher premiums based on income, a change instituted by Congress as part of the 2003 law that created the Medicare drug benefit. McClellan said the income-based premiums will save the financially troubled program $7.7 billion over five years and more than $20 billion over a decade.

Even at the higher rates, Medicare remains a good deal, he said. The most affluent beneficiaries, those with individual incomes of more than $200,000 a year, will pay just under $2,000 a year in premiums while receiving an average of $4,300 a year in benefits.

"That still makes it a very attractive insurance package," McClellan said.

The leader of one organization for seniors predicted that the higher premiums will drive away some of the more affluent seniors, undermining Medicare's broad political support and its finances.

"As healthier and wealthier seniors see their premiums rise, we fear that when that premium equals what they could pay for regular health insurance, why be in the program at all?" said Shannon Benton, executive director of the Senior Citizens League, an advocacy group with 1.2 million members. "We feel that eventually the sickest, the oldest and the poorest are going to be the ones left behind in Medicare, and their costs are going to go up significantly to sustain the program."

Rep. Nita M. Lowey (D-N.Y.) introduced a bill in April that would repeal the income-based premium increases, but it has not gotten out of a House committee.

Medicare officials said they expect 9,000 people to drop out of the program next year because of the new income-based premiums, and 30,000 to leave by 2010. Overall, that's not a lot, they said.

"I don't see any substantial adverse impacts on participation in Medicare, and I definitely see a very positive impact on making Medicare sustainable for the long term," McClellan said. Medicare officials had been projecting an even higher increase in the standard premium, but there has been an unexpected slowing in the volume of services and tests that doctors are ordering for their Medicare patients, McClellan said.

Officials said the standard premium increase of 5.6 percent is the smallest since 2001. It trails the projected 6 percent increase in per capita health spending next year and a projected 7 percent increase in prescription drug spending, they said. Average premiums in the Medicare drug benefit, known as Part D, are expected to remain flat in 2007, McClellan said.

McClellan said the Part B standard premium would have to go up by $1.50 in 2008 (in addition to routine annual premium increases) if Congress were to repeal a planned 5.1 percent cut in Medicare payments to physicians next year -- a cut that doctors are lobbying hard to kill.

That prospect troubles AARP -- the largest senior organization, with 37 million members.

"The fact that the premium is a little less than originally projected is good news, but . . . we may simply be forestalling higher costs to beneficiaries," said Kirsten Sloan, the organization's national coordinator for health.

© 2006 The Washington Post Company