Medicare Part B Premiums To Rise 17% Next Year, Bush Administration Announces

Monthly premiums for Medicare Part B -- which covers physician services, outpatient hospital care, some home health services and durable medical equipment -- will increase 17% to $78.20 in 2005, HHS officials announced Friday, the New York Times reports. The increase of $11.60 per month is the single largest dollar increase in Medicare's history, according to the Times (Harris, New York Times, 9/4). Premiums rose 13.5% this year and 8.7% last year, the Wall Street Journal reports (Lueck, Wall Street Journal, 9/7). According to HHS, the major factor behind increased premiums is higher spending under traditional, fee-for-service Medicare, particularly in higher payments to physicians. Under the new Medicare law, payments to physicians in 2005 will rise by 1.5% instead of decreasing by 4.5% as was planned initially. The new Medicare law also calls for increased payments to private Medicare plans, which also contributed to the premium increase (HHS release, 9/3). HHS also announced on Friday that the deductible for Medicare Part A -- which covers inpatient hospital care, skilled nursing facilities and some home health care -- will increase by $36 to $912 in 2005 (Sherman, AP/USA Today, 9/4).

Additional Benefits Offset Increase, McClellan Says
CMS Administrator Mark McClellan said the premium increase in part reflects the need to build up reserves in the Medicare Part B trust fund, as well as to cover expanded benefits called for in the new Medicare law (Connolly, Washington Post, 9/4). New benefits called for under the Medicare law include a "Welcome to Medicare" physical exam and screening program, as well as prescription drug coverage beginning in 2006, he said (New York Times, 9/4). McClellan added that the increased premiums would help ensure that beneficiaries have access to doctors (Wall Street Journal, 9/7). He said some of the Part B premium increase will be offset for beneficiaries enrolling in private plans, which often have lower out of pocket expenses and provide more benefits (New York Times, 9/4). "On net, Medicare beneficiaries are saving money," McClellan said, adding, "The new premiums reflect an enhanced Medicare that is providing seniors and people with disabilities with strengthened access to physician services and new preventive benefits." Medicare officials also said that the 2005 cost-of-living increase in Social Security payments -- which will be announced in the coming months -- likely will be greater than the Part B premium increase for most beneficiaries (Neuman, Los Angeles Times, 9/4).

Kerry Campaign Reaction
According to the New York Times, the announcement of the increase "immediately became grist for an increasingly contentious presidential campaign." Phil Singer, a spokesperson for the campaign of Democratic presidential nominee Sen. John Kerry (Mass.), said in a statement, "After doing nothing about the record increases in the cost of health care over the last four years, George Bush is presiding over a Medicare system that is socking seniors with the largest premium hike in the program's 40-year history" (New York Times, 9/4). Campaigning in Akron, Ohio, Saturday, Kerry blamed the premium increase on a "failed policy" by Bush (Hurt, Washington Times, 9/5). He said, "Who are they going to send the bill to? Are they going to send the bill to Haliburton? Are they going to send the bill to Ken Lay at Enron? You bet they're not. They're going to send the bill to our senior citizens" (Wallsten/Gold, Los Angeles Times, 9/5). Kerry added that the Bush administration is "trying to fake it to the American people. They're trying to bamboozle you and throw around so much mud that you can't really break through and grab onto things that are real in your lives" (Orin, New York Post, 9/5). Campaigning in Wisconsin Saturday, Democratic vice presidential nominee Sen. John Edwards (N.C.) said, "We have the largest increase in Medicare history ... it is on this president's watch. People can't just keep paying this" (Romano/Williams, Washington Post, 9/5).

Kerry TV Ad
The Kerry campaign "sprang into action" following the premium increase announcement by "producing a television ad accusing ... Bush of 'misleading on Medicare,'" according to the Washington Times. The spot shows Bush saying in his acceptance speech at the Republican National Convention on Thursday, "I believe we have a moral responsibility to honor America's seniors. Now seniors are getting immediate help." The narrator of the advertisement says, "The very next day, George Bush imposes the biggest Medicare premium increase in history, while prescription drug costs still skyrocket."

Timing of Announcement
The Kerry campaign also said that the Bush administration made the announcement on a Friday before the Labor Day holiday weekend to try to "conceal the bad news," according to the Washington Times (Washington Times, 9/5). The Wall Street Journal reports that Medicare premium increases traditionally are announced in mid-October, along with changes in Social Security payments. If the Bush administration had maintained that schedule, the increase would have been announced just prior to the November election, according to the Journal (Wall Street Journal, 9/7). McClellan said that the administration was simply "getting these numbers out as soon as we can." The Bush campaign also responded to Kerry's comments by saying that the premium increase is attributable to higher health care costs, which result partly from rising medical malpractice insurance costs. "John Kerry's completely opposed to fixing the [liability lawsuit] system," Steve Schmidt, a spokesperson for the Bush campaign, said (Washington Times, 9/5). He added that such a position is "raising the cost of health care for Americans and is forcing doctors like OB/GYNs to leave their practice" (Superville, AP/Boston Globe, 9/5).

Other Reaction
Robert Hayes, president of the Medicare Rights Center, called the increase a "body blow" to Medicare beneficiaries, adding that it is the result of "profligate management of Medicare" (New York Times, 9/4). He said, "This is going to make it even harder for a lot of older Americans to make ends meet" (Neuman, Los Angeles Times, 9/4). Sen. Jeff Bingaman (D-N.M.) said, "While Medicare patients will receive little or no benefit in return for the increase in premium payments next year, the prescription drug bill provided an immediate and dramatic increase in payments to HMOs -- that just doesn't make sense" (Washington Post, 9/4). Rep. Pete Stark (D-Calif.) said, "Record-high Medicare premium increases, coupled with an increase in the deductible, will make it even harder for those on fixed incomes to access Medicare benefits" (Colliver, San Francisco Chronicle, 9/4). He added, "This is a cynical attempt to bury bad news by leaking it out when you hope no one is watching. This administration has had four years to improve Medicare and instead ha[s] made it worse. Today's news reflects the reality, not rhetoric, of this administration's bad record on Medicare" (Neuman, Los Angeles Times, 9/4). David Grant, director of health policy for Senior Action Network, said, "It's kind of like a hidden tax on seniors." Michael Chee, a spokesperson for Blue Cross of California, said it is not yet clear how the premium increase will affect members of Medicare managed care plans, but he added, "There could potentially be changes in the future" (San Francisco Chronicle, 9/4).

Questioning Kerry's Stance on Medicare
Some Republicans are criticizing Kerry for being on record as "both for and against" a provision that would allow federal officials to negotiate lower prices with pharmaceutical companies, the Boston Globe reports. According to the Globe, Kerry has said that if he is elected president, he will ask Congress to revisit "the flawed prescription drug bill that prohibits Medicare from actually negotiating a lower price." However, Republicans say that Kerry in 2000 supported Medicare legislation sponsored by Senate Minority Leader Tom Daschle (D-S.D.) that included a similar ban on the federal government negotiating with pharmaceutical companies. Bush spokesperson Terry Holt said, "Kerry sees this provision as a way to take political advantage and strengthen his hand among seniors." Democrats say they included the provision to "reduce industry and Republican opposition to a Medicare prescription benefit," according to the Globe. Todd Webster, a spokesperson for Daschle, added that the provision in the 2000 bill is different from the one included in the new Medicare law because it would have called for the drug benefits to be administered by a single private-sector contractor in each region of the country instead of multiple contractors in each region. A smaller number of contractors would increase negotiating power, negating the need for the federal government to negotiate with pharmaceutical companies, he said (Rowland, Boston Globe, 9/7).

Broadcast Coverage
NPR's "All Things Considered" on Monday looked at Kerry's efforts to "re-energize" his campaign by "sharpening" attacks on Bush's handling of the economy and health care during Labor Day appearances in three swing states (Horsley, "All Things Considered," NPR, 9/6). The full segment is available online.