Medicare Beneficiaries Could Face Large Part B Premium Increases Next Year, Actuary Says

Medicare beneficiaries who participate in Part B, which covers most outpatient services, could face premium increases of 17% next year, CMS chief actuary Richard Foster said at a discussion sponsored by the American Enterprise Institute on Thursday, Cox News/St. Paul Pioneer Press reports. According to the estimate, included in an appendix to the annual Medicare trustees report released on Tuesday, Medicare Part B premiums could increase from $66.60 to $78.10 next year, the largest increase since the program began. CMS will announce the official premium increase this fall. Foster attributed the estimated premium increase "primarily" to a decision by Congress last year to eliminate a scheduled 4.5% reduction in Medicare reimbursement rates for physicians in 2004 and 2005, according to Cox/Pioneer Press. As part of the new Medicare law, Congress approved a 1.5% reimbursement rate increase for physicians in 2004 and 2005. The trustees report also estimates that Medicare Part B premiums will increase to $80 in 2006, $82 in 2007 and $85.60 in 2008. However, Foster said that because Congress likely "will again intervene to prevent" a provision in the Medicare law that would reduce reimbursement by 5% each year between 2006 and 2012, Part B premium increases could prove "far greater than predicted in the report," Cox/Pioneer Press reports (Lippman, Cox News/St. Paul Pioneer Press, 3/16).

Concerns Over Medicare Financial Problems
During the AEI discussion, Foster "hammered home" some of the potential financial problems for Medicare predicted in the trustees report, CongressDaily reports (Rich, CongressDaily, 3/25). According to the report, the Medicare hospital trust fund will become insolvent by 2019, seven years earlier than the estimate last year. The trust fund no longer has a surplus, and payroll tax income for the fund currently meets only 98% of expenditures, according to the report. As a result, Medicare will have to begin to pay for hospital expenses directly from the trust fund at some time this year. The report also found that Medicare, which last year accounted for 2.6% of the gross domestic product, will account for 3.7% of GDP in 2010, 7.7% in 2035 and almost 14% by 2079. Over the next 75 years, Medicare will have an unfunded liability of $27.7 trillion, the report found (Kaiser Daily Health Policy Report, 3/24). Foster said that "even under modest growth assumptions," Medicare costs will "rise substantially" over the next few years, CongressDaily reports. Gail Wilensky, a senior fellow at Project HOPE, added that the trustees report indicates "we have promised benefits that exceed" available funds. Robert Reischauer, president of the Urban Institute, said that Medicare is "just part of a larger problem of the rise in spending for health care," CongressDaily reports. The issue of increased costs in Medicare and other public health programs likely will prove "a central domestic challenge of our time," Congressional Budget Office Director Douglas Holtz-Eakin said (CongressDaily, 3/26).

A HealthCast of the AEI discussion -- "Has the Drug Benefit Changed Medicare's Long-Term Outlook?" -- is available online at kaisernetwork.org.

More Investigation Into Foster Allegations
Meanwhile, some House and Senate Democrats on Thursday called for more congressional hearings to investigate whether former CMS Administrator Tom Scully ordered Foster to withhold from lawmakers certain cost estimates for the Medicare legislation, CQ Today reports. Foster testified before the House Ways and Means Committee on Wednesday about his cost estimates (Carey, CQ Today, 3/25). Foster said that his office did not complete an official cost estimate for the enacted legislation until Dec. 23. However, Foster said that as early as June, he shared with Doug Badger, health policy adviser for President Bush, and James Capretta, associate director of the Office of Management and Budget, his estimate that the Medicare legislation would exceed the target cost. According to OMB estimates released after Congress passed the legislation, the Medicare law will cost $534 billion over the next 10 years, $134 billion more than estimated by CBO. In an e-mail to colleagues at CMS in June, Foster indicated that he believed he could lose his job if he released his cost estimates for the Medicare legislation. Scully has said that he did not threaten to fire Foster if he released the higher cost estimates. Scully also said that he "curbed Foster on only one specific request" made by Democrats at the time of the first House vote on the Medicare legislation. White House spokesperson Trent Duffy on Wednesday said that Badger had no recollection that he issued an order to withhold from Congress cost estimates for the Medicare legislation. Last week, HHS Secretary Tommy Thompson and 18 Senate Democrats requested that the HHS Office of Inspector General and the General Accounting Office examine the issue. Senate Democrats on Wednesday also asked the Department of Justice to conduct an investigation (Kaiser Daily Health Policy Report, 3/25). According to CQ Today, 10 Democrats on the House Ways and Means Committee have asked to call Scully and other additional witnesses at a future hearing. In addition, Democrats on the Senate Finance Committee have asked committee Chair Chuck Grassley (R-Iowa) to call a hearing on the issue (CQ Today, 3/25).

A HealthCast of the Ways and Means hearing is available online at kaisernetwork.org.

Foster Profile
The Baltimore Sun on Friday published an article that profiled Foster (Zaneski, Baltimore Sun, 3/26). The complete article is available online.

Broadcast Coverage
ABCNews' "Nightline" Thursday reported on the process of passing the Medicare legislation, including the cost estimate discrepancies and allegations that that some House Republicans offered Rep. Nick Smith (R-Mich.) money for his son's election campaign if he voted for the Medicare legislation. The program includes comments from Cybele Bjorklund, Democratic staff director for the House Ways and Means Subcommittee on Health; Senate Minority Leader Tom Daschle (D-S.D.); Senate Majority Leader Bill Frist (R-Tenn.); Sen. Chuck Hagel (R-Neb.); House Minority Whip Steny Hoyer (D-Md.); Robert Moffit, director of the Center for Health Policy Studies at the Heritage Foundation; Norm Ornstein of the American Enterprise Institute; Rep. Pete Stark (D-Calif.); Rep. Pat Toomey (R-Pa.); and Rep. Henry Waxman (D-Calif.) (Morris/Tapper, "Nightline," ABCNews, 3/25). The complete transcript of the program is available online. A video excerpt of the program is available online in RealPlayer.