Medicare Recipients Face Largest Premium Increase

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Medicare Recipients Face Largest Premium Increase

Medicare recipients face the largest premium increase in 11 years. According to Medicare’s chief actuary, in 2004 the Medicare premium is expected to rise to $66 per month, an increase of $7.30 or 12.4% over the 2003 premium of $58.70. The 12.4% Medicare premium increase is 5 times higher than the estimated Cost-of-Living Adjustment (COLA). Recently the Social Security Trustees estimated that the COLA effective on January 1, 2004, would be 2.3%.

The Medicare Trustees attribute the big jump in Medicare Part B premiums to several factors, including:

The transfer of certain home health care services from Medicare Part A to Part B as specified by 1997 legislation.
The transfer has taken place gradually and the final adjustment will be made in 2003.
Significant growth in the volume and intensity of services performed by physicians in 2002.
A 20% annual growth rate in durable medical equipment and physician administered drug expenditures for 2002, and
enactment of legislation that significantly raised expenditures for physician services beginning in March of 2003.

The higher spending caused the Medicare Trustees to adjust all their estimates of beneficiary premiums upward as illustrated in the following chart:

Medicare Premiums On the Rise

Year	Estimated in 2002	Estimated in 2003
2003	$57.00	$58.70 (actual)
2004	$59.80	$66.00
2005	$63.90	$68.60
2006	$67.70	$72.20
2007	$71.60	$76.20
2008	$76.00	$80.80
2009	$80.60	$85.50
2010	$86.10	$90.50
2011	$90.80	$95.60

Source: 2002 and 2003 Medicare Trustees Report, March 2002 and 2003.

One significant cause of “higher than expected” Medicare expenditures is likely to be a result of billing abuse, indicating a need for stronger oversight. The General Accounting Office (GAO) recently reported:

In 2001, Medicare’s payments for home health care were, on average, about 35% higher than the estimated costs. The Centers for Medicare and Medicaid Services (CMS) has yet to adopt GAO recommendations that would minimize excessive payments. — “Major Management Challenges and Program Risks,” January 2003.
In 2001, only 10% of all physician practices had claims subjected to medical audit. That rate had not changed for 2002.— “CMS Reforms Address Carrier Scrutiny of Physicians’ Claims,” May 2002.
Medicare often pays higher prices than others for medical products. Medicare payments for physician-administered drugs such as those for cancer chemotherapy, far exceed widely available prices to providers by 13% to as much as 86%. In some cases patients’ co-payments may be more than what the doctor paid for the drug. — “Major Management Challenges and Program Risks,” January 2003.

Sources: “Medicare Recipients Face 12.4% Rise in Premiums,” The New York Times, March 26, 2003. 2002 and 2003 Medicare Trustees Reports, March 2002 & 2003.

For more on this story, see: “Legislative Update: Medicare Fraud is Picking Our Pockets” at http://www.tscl.org/NewContent/101806.asp.

July 2003