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Medicare premiums to rise next year

Increase to be offset by Social Security COLA

- The Washington Times - Thursday, October 27, 2011

Medicare premiums for most seniors will rise slightly next year after a three-year freeze that was pegged to stagnant Social Security benefits.

All but the most wealthy seniors will pay $99.90 each month for their Medicare insurance, up $3.50 from the premium most paid over the past three years. The Obama administration said the increases will be offset by a cost-of-living adjustment in Social Security benefits, also the first since 2008.

The $3.50 amounts to about 10 percent of the average cost-of-living adjustment.

"We are excited about being able to offer people better Medicare at less cost. That just makes sense," said Dr. Donald M. Berwick, administrator for the Center for Medicare and Medicaid Services (CMS).

Premiums for 75 percent of seniors have remained stable recently owing to a law that links them to Social Security payouts. Medicare premiums can't be raised unless accompanied by cost-of-living adjustments in Social Security income. In turn, cost-of-living adjustments are pegged to inflation for consumer goods.

For the other 25 percent of seniors who didn't qualify for the freeze, premiums will fall to the $99.90 level. They include seniors who are high-income, brand-new to the program or who qualify as "dual-eligibles," those on both Medicare and Medicaid. Their monthly premiums last year cost at least $115.40.

Officials also said the deductible for the Medicare Part D prescription-drug program will decrease by $22 next year, to $140. And premiums for hospital coverage under Medicare Part A will inch up, although the program doesn't collect premiums from most seniors.

CMS actuaries calculate the premiums based on a complex set of conditions and formulas determined by Congress. In setting the 2012 rates, they assumed Congress won't allow payments for Medicare providers to drop by one-third as scheduled, officials said.

Every year for nearly a decade, legislators temporarily have boosted reimbursements in a move termed the "Doc Fix." Without the Doc Fix, legislators fear that a faulty calculation called the Sustained Growth Formula (SGR) would reduce payments so dramatically that doctors and hospitals would be discouraged from accepting Medicare patients.

"When our actuaries calculate the Part B premium, they assume the SGR will be fixed," said Jonathan Blum, deputy administrator for CMS. "These premium numbers today assume that Congress will fix SGR or find a sufficiency."

The increases are lower than expected by the Department of Health and Human Services earlier this year, when officials predicted $106.60 premiums in 2012. Mr. Berwick attributed the cheaper premiums in part to President Obama's new health care law.

The news comes a month after officials said Medicare Advantage premiums will shrink and enrollment will rise next year. The program allows seniors to obtain additional coverage through a private company.

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