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Medicare Premium Soars 17.5% Largest Ever - TSCL Working to Protect Seniors From Future Skyrocketing Costs

Medicare premiums will rise by the largest dollar amount in the program�s history in 2005. Starting in January, most beneficiaries will pay 17.5% more � with the monthly premium rising $11.60 to $78.20 per month. The Part B deductible will also increase by $10 to $110. An increase of this size will take most, if not all, of the annual Cost-of-Living Adjustment (COLA) for many seniors who have lower benefits � leaving little or nothing to cover rising costs of Medicare supplemental insurance, prescription drugs, and home heating.

What�s causing the big jump in costs?

  • New Medicare legislation substantially increased program costs by boosting payments to certain healthcare providers, after the premium for 2004 was already set. � According to the Medicare Trustees, the new Medicare drug legislation significantly increased payments to physicians, private managed care plans, and rural Part B providers in 2004. These increases came into effect after the 2004 costs had been estimated and the Medicare premium had been announced in October 2003, requiring the very substantial increase in 2005 to make up for the extra spending.
    TSCL believes that, as the nation�s largest purchaser of health care services, Medicare has an obligation to beneficiaries and taxpayers to be a prudent steward of limited program finances. While providers should be paid adequately in order to ensure access to services, the government can do better at phasing-in reasonable fee increases for providers. In addition, TSCL is studying proposals that would protect seniors� COLAs from big jumps in the Medicare premium.
  • �Improper payments� cost Medicare an estimated $11.6 billion. � According to the Centers for Medicare & Medicaid Services (CMS), the government spent an estimated $11.6 billion on improper Medicare fee-for-service payments in fiscal year 2003. With 41 million Medicare beneficiaries, that�s about $283 per recipient. Waste, fraud, and abuse drives up the cost of premiums for seniors because Medicare beneficiaries pay 25% of the cost of Part B services and the government pays 75%.

TSCL believes that Medicare costs could be considerably lower if there were better oversight of the Medicare program and if there were tough penalties for those who �game� the system. TSCL is monitoring new anti-fraud initiatives that were part of recently enacted Medicare drug legislation and will continue to support the adequate funding and implementation of measures to cut improper payments.

Sources: 2004 Medicare Trustees Report, March 23, 2004, pages 85 & 86. Spring 2004 Semiannual Report, Department of Health and Human Services Office of Inspector General, October 2003 � March 2004, page II. HHS Announces Medicare Premium, Deductibles for 2005, Centers for Medicare and Medicaid Services, September 3, 2004.

September 2004


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