If forecasts prove correct, there's trouble ahead for millions of seniors in 2008.  Recently, the Congressional Budget Office (CBO) released its annual economic update predicting that annual Cost-Of-Living Adjustments (COLAs) will increase by just 1.5% next year.   In addition, the CBO estimates that Medicare spending this year will rise ten times faster, by 15%.  If that happens, the increase in projected Medicare Part B premiums for 2008 would require the entire annual COLA for as many as 22 million beneficiaries - about half of all Social Security beneficiaries. 

Why the huge jump?  Medicare Part B premium rates are supposed to be set to match program costs.  Yet in recent years Congress has routinely enacted legislation that substantially affects program costs after the premium rates for the following year have been set.   This ongoing problem has made it very difficult to achieve adequate levels of funding for Part B. 

Last year the Medicare Trustees estimated the Part B premium for 2007 would be $98.20.  But the actual premium announced in September was much lower - $93.50, or $4.70 less per month.  One reason cited for the lower premium was lower payments to physicians.  Yet after that announcement, Congress increased reimbursements to physicians and certain other providers.

In their 2006 report, the Medicare Trustees forecast that correcting Part B's deficit would require an 11% increase in the 2007 premium.  But instead of an 11% increase, which would have been $98.20, the Centers for Medicare and Medicaid Services increased premiums by only 5%.  Thus, about 6% of the 2007 premium increase is unaccounted for and may have to be made up next year. 

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Part B premiums have increased on average about 11.6% over the past five years.  When the unaccounted-for 6% is added to that, an increase of 17% would appear to be required in 2008.  If that happens, base Part B premiums would rise by $15.90 to $109.40 per month.   But a 1.5% COLA would increase average benefits, currently $1,044 per month, by only $15.70, taking the entire COLA.

TSCL recently publicized the Administration's low COLA estimate and forecast that Medicare Part B premium increase for 2008 could be a record high.  The forecast drew widespread news coverage, and prompted a reply from the Centers for Medicare and Medicaid.  "We believe a brief examination of the relevant data leads us to conclude that the situation for 2008 is not nearly so dire as portrayed in the TREA [Senior Citizens League] study," Jeff Nelligan, a spokesman for Medicare said.

TSCL's Chairman of the Board, Ralph McCutchen, responds, "It's sad the Administration doesn't view its own COLA estimates of 1.5% and the problem of unaffordable Medicare premium increases as dire.  We don't agree with this assessment.  Our 1.2 million members tell us they struggle to afford these rising costs every day - that's pretty dire," McCutchen says.

TSCL is fighting for more adequate and fair Cost-of-Living Adjustments (COLAs) by calculating the annual increase using the Consumer Price Index for Elderly Consumers (CPI-E).  The CPI-E more closely reflects the portion of income that seniors spend for health care services.

Sources:  2007 Budget and Economic Update, Congressional Budget Office, January 24, 2007.  2006 Medicare Trustees Report, May 1, 2006.  "Group Predicts Hike In Medicare Part B Premiums," Larry Lipman, The Atlanta Journal-Constitution, February 14, 2007.

May 2007