Monday, September 19, 2005

Medicare

Medicare Part B Premiums To Rise 13.2% Next Year, Officials Announce

      The monthly premium for Medicare Part B, which pays for physician visits and some outpatient hospital services, in 2006 will increase by $10.30 to $88.50, CMS officials announced Friday, the AP/San Francisco Chronicle reports (Freking, AP/San Francisco Chronicle, 9/16). The current premium is $78.20 monthly, while it was $66.60 in 2004 and $58.70 in 2003 (Pear, New York Times, 9/17). Under federal law, Medicare Part B premiums must cover 25% of Part B costs, while taxpayers pay the remaining 75% (Pugh, Knight Ridder/Contra Costa Times, 9/17). The 13.2% increase for 2006 is approximately in line with CMS actuaries' predictions in April. In a news release, CMS attributed the increase to rapid growth in physician office visits, use of laboratory tests and other medical services and hospital outpatient services (CQ HealthBeat, 9/16). The volume of physician services increased 6.3% last year and is expected to increase 5.6% this year. Use of hospital outpatient services has increased at a similar rate (AP/San Francisco Chronicle, 9/16). A requirement to increase assets in the Part B trust fund also contributed to the increase, CMS officials said (CQ HealthBeat, 9/16). In addition, part of the increase is attributable to higher payments to Medicare HMOs, according to the New York Times (New York Times, 9/17). The deductible for Medicare Part B will increase from $110 this year to $124 in 2006, the Wall Street Journal reports. The deductible increase was required in the 2003 Medicare law. In addition, the deductible for a hospital stay of 60 days or less will increase $40 to $952 in 2006 (Lueck, Wall Street Journal, 9/17). CMS said in a statement that many beneficiaries will have lower out-of-pocket costs in 2006 because of increased coverage under the new prescription drug benefit. The statement also said that financial assistance provided for in the new prescription drug benefit means about 25% of Medicare beneficiaries in 2006 will pay little or no premium for either Medicare Part B, the new drug benefit, or both (CQ HealthBeat, 9/16).

Reasons Behind Increased Use of Services
According to Knight Ridder/Times, it is unclear why Medicare is paying more overall for services. Some experts attribute the increased spending to an "overall improvement in the quality of care" or an increased use of services by doctors who practice "defensive medicine" to protect themselves against malpractice lawsuits (Knight Ridder/Contra Costa Times, 9/17). Doctors also attribute much of the increase in Medicare spending to research breakthroughs, new treatments and technology that have been approved for coverage, and efforts to encourage cancer and diabetes screenings. J. James Rohack, a trustee at the American Medical Association, said physicians are reducing hospital costs by seeing patients more frequently to manage chronic conditions such as diabetes and congestive heart failure (New York Times, 9/17).

Kuhn Comments
Herb Kuhn, director of the Center for Medicare Management, said CMS is working to understand "how much value" is resulting from the increased spending on services (AP/San Francisco Chronicle, 9/16). He added, "Medicare needs to move away from a system that pays simply for more services, regardless of their quality or impact on beneficiary health" (New York Times, 9/17). Kuhn said, "Simply adding larger payment updates to the current system would not only be expensive but from a standpoint of promoting more efficient and better quality care, this is not going to get us there." The increased use of services combined with the new Medicare prescription drug benefit that begins in 2006 has caused "major concern" at CMS about the cost of Medicare (Knight Ridder/Contra Costa Times, 9/17).

Impact on Physician Payments
According to CQ HealthBeat, the increased premium might "complicate prospects for an increase in Medicare physician payments since any increase in what Medicare pays physicians would increase Medicare Part B premiums even further" (CQ HealthBeat, 9/16). The premium increase was calculated assuming no change in current law (New York Times, 9/17). However, doctors are lobbying Congress to reverse a 4.3% reduction in Medicare physician payments scheduled for 2006 (CQ HealthBeat, 9/16). If Congress reversed the cut, Medicare spending on physician services would increase more than anticipated, likely further driving up premiums in 2007, CMS Chief Actuary Richard Foster said (Knight Ridder/Contra Costa Times, 9/17). Kuhn said, "We need to be sure [doctors are] adequately compensated for participating in this program, but how we pay them also matters. The current system clearly is not sustainable" (Wall Street Journal, 9/17). According to the New York Times, the Bush administration has endorsed a pay-for-performance Medicare physician payment system and is working to develop quality incentives to implement such a system.

Reaction
Grace-Marie Turner, president of the Galen Institute, said the premium increase announcement likely will "create a political firestorm." She added, "Some areas of the country are seriously overusing health care. Everyone winds up paying the price for that. ... Consumers need more incentives and more power to manage the costs of their care." Sen. Jeff Bingaman (D-N.M.), who introduced a bill that would reduce Medicare payments to private plans and use the savings to cut beneficiaries' premiums, said, "With home heating prices expected to rise this winter, many seniors will find it very hard to absorb the higher premium" (New York Times, 9/17). Bill Vaughan, a senior policy analyst for Consumers Union, said the premium increase is "another wake-up call for the need to get a handle on runaway health inflation." He added that increased use of certain services "must be slowed to keep millions of seniors from sliding toward poverty. Proposals to further increase Part B costs need to be offset with savings in these high-tech services, many of which are more profitable than useful to patients" (CQ HealthBeat, 9/16). Kirsten Sloan, a health policy analyst at AARP, noted that the Medicare Part B premium is increasing by about $30 per month from 2003 to 2006. She added that any savings to beneficiaries resulting from the new prescription drug benefit "could be eroded by increases in premiums, deductibles and copayments elsewhere in the Medicare program" (New York Times, 9/17).

Related News

• Los Angeles Times: The Los Angeles Times on Saturday examined how a federal policy that Medicare beneficiaries' Social Security numbers be printed on their Medicare cards could open them up to identity theft. According to the Los Angeles Times, CMS issues "more cards with Social Security numbers than any other agency except for Social Security." The Government Accountability Office and the Federal Trade Commission could not estimate how many instances of identity theft might be linked to the use of Social Security numbers on government-issued cards, but critics are lobbying Congress to approve legislation that would require Medicare to stop issuing cards with the numbers beginning Jan. 1, 2006. CMS spokesperson Peter Ashkenaz said Medicare officials are aware of the privacy concerns but noted that there are no plans to issue cards with different numbers, in part because the cost would be about $100 million and would require changing the agency's computer systems (Kristoff, Los Angeles Times, 9/17).
  
  
• Philadelphia Inquirer: The Inquirer on Sunday examined the "weighty question" of "[h]ow much profit" from the new Medicare drug benefit will "flow" to the prescription drug industry. According to the Inquirer, estimates range from $139 billion to "a tiny fraction of that amount," depending on how many beneficiaries enroll and what kind of discounts and premiums will be available. Analysts say the companies that are most likely to see a profit in the initial stages of the new benefit are manufacturers of generic drugs and brand-name medications for low-income and elderly patients covered as dual eligibles (Ginsberg, Philadelphia Inquirer, 9/18).