Medicare Part A Deductibles, Part B Premiums To Rise Next Year; Conferees Reportedly Nearing Deal on Relating Premiums to Income

Premiums for Medicare Part B, which covers physician visits and outpatient care, will rise to $66.60 per month next year, an increase of 13.5% from $58.70 this year and "one of the largest increases in the history of the program," the New York Times reports (Pear, New York Times, 10/16). HHS also announced that it will raise the deductible for Medicare Part A, which covers hospital stays, skilled nursing facilities stays and some home health care, from $840 to $876 (HHS release, 10/16). According to the Times, CMS updates the Part B premium each year to cover about 25% of the cost of Medicare part B. Federal officials attributed the relatively large increase this year to rises in Medicare spending for doctors' services, outpatient hospital care and medical equipment for home health services. The Times reports that the premium increase does not account for the cost of a possible drug benefit or a proposal under consideration by lawmakers working to reconcile the House and Senate Medicare bills (HR 1 and S 1) that would require beneficiaries with higher annual incomes to pay higher Part B premiums (New York Times, 10/16). CongressDaily/AM reports that the increase "comes as a nearly direct result of a congressional action earlier this year to avert a fee cut for physicians" (Rovner, CongressDaily/AM, 10/16). In February, Congress agreed to add provisions to the fiscal year 2003 omnibus appropriations package that would increase Medicare payments to physicians by $49 billion over 10 years and avert a scheduled 4.4% cut in payments (Kaiser Daily Health Policy Report, 2/11). The Part B premium increase also is related to an "assumption that Congress might act again to avert another 4.2% physician fee cut scheduled for next year," CongressDaily/AM reports (CongressDaily/AM, 10/16). HHS Secretary Tommy Thompson said that the "hefty" premium increase "underscores the need to overhaul" the Medicare program, the Wall Street Journal reports. "We need a Medicare system that provides more choices for beneficiaries and more incentives for efficient, high-quality care," he said. He added that such "a system would help keep costs down and Medicare solvent," the Journal reports (McGinley/Lueck, Wall Street Journal, 10/16). CMS Administrator Tom Scully said that the premium increase shows that lawmakers should support increasing the role of private health plans in Medicare, which he said would allow beneficiaries "access to lower premiums and lower costs." Many Democrats do not agree that private plans would decrease costs, according to the Times (New York Times, 10/16).

Conferees Agree to Idea of Income Relating
The announcement of the premium increase comes as conferees on Wednesday "agreed in principle" to the idea of relating Medicare Part B premiums to beneficiaries' income, the Washington Post reports. According to unnamed congressional sources, conferees have "reached consensus on the basic strategy" for charging wealthier beneficiaries higher premiums for Part B, but they have not resolved how many beneficiaries would be charged the higher premiums, when the new fees would begin or how the new premium schedule would be administered (Goldstein, Washington Post, 10/16). According to CongressDaily/AM, the announcement regarding the higher Part B premiums made by the administration on Wednesday "might give some members of Congress pause about adding an increase on top of that." Sen. Don Nickles (R-Okla.) said, "We made some progress, but nothing's tied down yet" (CongressDaily/AM, 10/16). Negotiators on Wednesday discussed whether to set the income threshold for the higher premium at $100,000, $60,000 or another amount. Congressional sources said that the proposed higher premiums would likely replace a similar provision included in the House bill regarding beneficiaries' out-of-pocket costs for the prescription drug benefit (Washington Post, 10/16). But House Energy and Commerce Chair Billy Tauzin (R-La.) said that was "not necessarily" the case (CongressDaily/AM, 10/16). The House plan calls for beneficiaries with higher incomes to spend more out-of-pocket for prescription drugs before catastrophic coverage takes effect (Kaiser Daily Health Policy Report, 10/6). Sen. Edward Kennedy (D-Mass.) on Wednesday voiced his opposition to the income-relating provision, saying, "I oppose means testing because it heads Medicare in the wrong direction." The senator has threatened to filibuster the entire Medicare bill if it emerges from conference committee with the income-relating provision (Washington Post, 10/16). The apparent compromise on income relating is "an important step toward agreement on an overall Medicare prescription-drug bill" and "signal[s] a historic shift in a program that has always provided a standard benefit at a fixed price," the AP/Richmond Times-Dispatch reports (AP/Richmond Times-Dispatch, 10/16). House Majority Leader Tom DeLay (R-Texas) said that conferees are likely to "produce a bill that would garner the support of House conservatives and Democrats alike," CongressDaily reports (Heil/Wegner, CongressDaily, 10/15).

More Progress
Conferees on Wednesday also apparently made progress toward agreement on a plan that would boost incentives for employers that offer retiree drug benefits to retain those benefits should a Medicare drug benefit be enacted (AP/Richmond Times-Dispatch, 10/16). They also "discarded" a proposal that would have created a new agency to manage Medicare drug benefits and to encourage beneficiaries to enroll in private health plans, Sen. John Breaux (D-La.), a member of the conference committee, said, the Times reports. Both the Senate and House bills had included provisions calling for such an agency in response to concerns of some Republicans and Democrats about the potential for "heavy-handed regulation of the health care industry by Medicare officials," the Times reports. But conferees said that any new agency "would duplicate the existing bureaucracy and would be confusing and disruptive," according to the Times (New York Times, 10/16). Lawmakers acknowledge that they will likely not meet the Oct. 17 deadline for a final compromise as set by Republican leaders (Washington Post, 10/16).

Related News
The following summarizes other developments and news related to Medicare:

• Sen. Charles Schumer (D-N.Y.) said on Wednesday that he "strongly" opposes a proposal that would impose new copayments under Medicare for home health care services (AP/Long Island Newsday, 10/15). Several negotiators said on Monday that they are considering implementing a $40 to $45 copay for each 60-day period in which a beneficiary receives home health care services. The House bill includes such a copay provision, but the Senate bill does not. The House bill also would reduce the annual increase in Medicare payment rates for home health services in each of the next three years. The new copay and the eliminated rate increase would reduce Medicare spending by $7 billion over the next 10 years (Kaiser Daily Health Policy Report, 10/14). Schumer estimated that the new copay could cost people in New York state more than $6.9 million (AP/Long Island Newsday, 10/15).
  
• In a briefing sponsored by Rep. Ron Paul (R-Texas), Sue Blevins, president of the think tank Institute for Health Freedom, called for the Medicare prescription drug legislation to "include language specifically allowing participants to pay for drugs without going through the Medicare program." Blevins said that conferees should "avoid battles over private contracting" in Medicare when voting on the final bill (CongressDaily, 10/15).
  
• The Washington Post on Thursday examined a partnership between AARP and the Business Roundtable that aims to urge Congress to "find common ground on Medicare reform." The two groups published advertisements this week in the Post, USA Today, the New York Times, Roll Call and the Hill calling for such a compromise (Sarasohn, Washington Post, 10/16). The ads call for a Medicare drug benefit to be comprehensive and to cover all Medicare beneficiaries. The groups urged Congress to "enact a Medicare drug benefit that provides incentives for employers to continue to provide high-quality drug coverage to retirees." The groups also asked lawmakers to allow beneficiaries to stay in traditional Medicare "without financial penalty" (Kaiser Daily Health Policy Report, 10/14).
  
• PBS' "NewsHour with Jim Lehrer" on Wednesday reported on the Oct. 17 deadline set by Republican leaders for negotiators to finish work on Medicare legislation ("NewsHour with Jim Lehrer," PBS, 10/15). The full transcript of the segment is available online.

Ask The Experts
A webcast of a kaisernetwork.org live panel discussion called "Ask The Experts" on Medicare reform and the prescription drug benefit currently being debated on Capitol Hill is available online.