Medicare premiums won’t soar

WASHINGTON — Most elderly and disabled people on Medicare will see their premiums rise to $93.50 per month next year, a 5.6 percent increase.

That’s lower than anticipated.

However, the news was not as good for wealthier beneficiaries. For the first time in the program’s 41-year history, that group will pay more for the insurance that covers doctors’ visits and outpatient hospital care, known as Medicare Part B.

The higher payments will apply to about 1.5 million beneficiaries with incomes of more than $80,000 a year. Congress approved means testing in the 2003 law that created the Medicare drug benefit.

Mark McClellan, administrator for the Centers for Medicare and Medicaid Services, said that wealthier seniors will still get a significant government subsidy when participating in the program. Meanwhile, the higher payments from the wealthy reduce the government’s costs by $20 billion over the next 10 years.

“They’re still getting a subsidy on their Part B insurance of more than $2,400 next year,” he said. “That still makes it a very attractive insurance package.”

Shannon Benton, executive director of an advocacy group called TREA Senior Citizens League, said the higher premiums seem fair at first glance, but could come back to haunt the poorest and sickest beneficiaries.

“As wealthy seniors abandon Medicare as it becomes more expensive and choose private insurance instead, only the poorest and sickest will be stuck in Medicare, driving up costs for everyone left behind,” Benton said.

For individuals who earn more than $80,000, or couples who earn more than $160,000, premiums will jump to $106. That amount goes up even more for seniors with higher incomes. For the wealthiest seniors, the monthly premium would go to $162.

Monthly premiums for Medicare insurance had increased at double-digit percentages for three consecutive years. They grew from nearly $59 a month in 2003 to $88.50 this year. Administration officials announced just this summer that another double-digit increase could be expected next year.

But something unexpected happened, McClellan said. The volume of services and tests ordered by physicians will grow less than expected. Volume will increase 4.9 percent next year, but had been expected to go up at least 6 percent.

The formula setting the premiums also assumed that Medicare will cut payment rates for physicians next year by about 5 percent.

Many people don’t believe that Congress will allow such a cut to occur, but any changes to the physician’s payments won’t be reflected in premiums until 2008.

“It’s good news for ‘07, but it will make ‘08 a little tougher,” said Kirsten Sloan, the AARP’s national coordinator for health issues.