Senators Discuss Medicare Part B Premium Increase During Finance Committee Hearing

Some Democrats during a Senate Finance Committee hearing Tuesday expressed concern about a recently announced 17.5% increase in Medicare Part B premiums in 2005, saying the Bush administration is to blame for the "record" rise in costs, Reuters/Houston Chronicle reports (Reuters/Houston Chronicle, 9/15). HHS officials announced earlier this month that monthly Part B premiums will increase by $11.60 to $78.20 in 2005. The increase is the single largest dollar increase in Medicare's history. Premiums rose 13.5% this year and 8.7% last year. 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 also announced 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 (Kaiser Daily Health Policy Report, 9/7).

Hearing
According to Democrats at the hearing, the Bush administration caused the higher premiums because it has not contained health costs and instead increased payments to private health plans to encourage participation in Medicare, Reuters/Chronicle reports. Sen. Jeff Bingaman (D-N.M.) said that beneficiaries are feeling the effect "of these large payments to HMOs" (Reuters/Houston Chronicle, 9/15). Some Democrats suggested that the administration delay the scheduled premium increase until 2006, but CMS Administrator Mark McClellan said that doing so would lead to a 20% premium increase that year (Pear, New York Times, 9/15). McClellan told reporters that better disease management and other medical innovations would help control Medicare costs and keep the Part B increase for 2006 below 10%, as long as Congress does not block the 2005 planned increase (Reuters, 9/14). McClellan added that the 2005 planned premium increase is the result of higher projected Medicare spending, accounting for the increased private plan payments and enhanced benefits. He said that Medicare participants "will be getting more benefits than ever." Sen. Gordon Smith (R-Ore.) said, "President Bush is not to blame for this [premium increase]. He is following the law."

Kerry Criticism
Democratic presidential nominee Sen. John Kerry (Mass.) in recent days has criticized Bush for the premium increase. The New York Times reports that a 1997 law requires Part B premiums to be set at an amount that would cover about 25% of the cost of that part of Medicare, which covers physician and other outpatient services (New York Times, 9/15). But Democrats have said that the law only establishes a formula for setting Medicare premiums, not for specific prices (Reuters/Houston Chronicle, 9/15). Sen. Jon Kyl (R-Ariz.) said, "When the Kerry people come out and say, 'Bush increased your premiums,' it is just wrong, but it is up to the administration to correct that." Kyl suggested that the administration could better educate Medicare beneficiaries about the enhanced coverage called for under the new Medicare law (Finnegan/Hook, Los Angeles Times, 9/15).

Medicare Law Update
During the hearing, McClellan offered an "upbeat assessment" of the new Medicare law, noting that as of Sept. 2, more than 4.3 million out of an anticipated 7.3 million beneficiaries have received the new Medicare prescription drug discount cards, the New York Times reports. However, only 1.3 million low-income beneficiaries out of an estimated 4.7 million who are eligible have signed up to receive additional assistance with their prescription drug costs, McClellan said. Sen. Max Baucus (D-Mont.) said, "I believe there are too many choices. Too many choices, too many options can result in paralysis." The Medicare Web site includes information for more than 60,000 drug products and 73 discount cards, according to the New York Times. McClellan also said that the new law could help staunch a decline in retiree health coverage over the last few years. But Gerald Shea, assistant to the president of the AFL-CIO, said the Medicare law offers "too few protections for retirees," and it could "produce some momentum to further reduce retiree coverage, just the opposite of what was intended by Congress" (New York Times, 9/15).

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