Medicare beneficiaries' Part B premiums will rise 13.5% next year to $66.60 each month, up from $58.70 this year, HHS announced Wednesday.
Separately, members of a congressional conference committee negotiating a Medicare reform bill are considering income-related Part B premium increases for wealthier seniors.
Medicare Part B helps pay for physician services, hospital outpatient care, durable medical equipment and other outpatient services. About 95% of 41.7 million Medicare beneficiaries are enrolled in the optional Part B, and about 90% of seniors have supplemental coverage to reduce out-of-pocket spending, such as Medigap, Medicaid or Medicare+Choice, according to HHS.
By law, the Part B premium must cover 25% of estimated Medicare program costs, with taxes covering the remaining 75%. This year's increase is pegged to the rising costs of healthcare overall, says an HHS spokesperson. Spending for physician services accelerated from 6.9% in 2000 to 8.6% in 2001, according to an HHS annual spending report released in January.
In February, Congress halted a planned 4.4% cut to physicians by increasing Medicare reimbursement to doctors by $49 billion over 10 years. CMS has scheduled a 4.2% physician reimbursement cut for 2004.
The premium increase for 2004 is the largest since 1993, when Part B premiums went up 15.1%, from $31.80 to $36.60, HHS says. The largest increase ever was 38.5% in 1988.
HHS Secretary Tommy Thompson says the premium changes underscore the need to improve and modernize the Medicare program by providing more choice.
Medicare negotiators also are considering a form of means testing similar to a proposal offered in June by Sens. Dianne Feinstein (D-Calf.) and Don Nickles (R-Okla.) that would charge higher Part B premiums to about 2% of beneficiaries with incomes of more than $100,000. The result would be an estimated $40 billion savings over 10 years.
Strong opposition from Sen. Edward Kennedy (D-Mass.) killed that option last summer.