Medicare Premiums to Jump a Record 17%

By Johanna Neuman

Sept. 4, 2004 12 AM PT

Times Staff Writer

WASHINGTON — In the largest increase in the history of Medicare, insurance premiums paid by elderly and disabled patients for routine care will rise 17% next year, the Bush administration said Friday.

The premium increases announced late in the afternoon as the capital emptied for the three-day Labor Day weekend and Republicans wrapped up a jubilant week at their convention in New York -- would affect nearly all of the 41.8 million beneficiaries of Medicare.

The boost from $66.60 to $78.20 a month is the largest increase in the program’s 40-year history. The premiums are for Medicare Part B, which provides Medicare patients with coverage for physician services, outpatient hospital care, certain home health services and durable medical equipment.

In announcing the $11.60-a-month increase, the government said the higher premiums reflected general growth in healthcare costs, higher payments to doctors and Medicare modernization.

“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,” said Dr. Mark McClellan, administrator of the federal Centers for Medicare and Medicaid Services.

Advocates for elderly and disabled beneficiaries said the extra costs would burden many of those who rely on the program.

“This is going to make it even harder for a lot of older Americans to make ends meet,” said Robert M. Hayes, president of the Medicare Rights Center. “Already there are a lot of older people who are teetering on the edge of poverty.”

Critics pounced on both the timing and content of the administration’s announcement, which seemed designed to garner as little publicity as possible.

“This is a cynical attempt to bury bad news by leaking it out when you hope no one is watching,” Rep. Pete Stark (D-Hayward) told Associated Press. “This administration has had four years to improve Medicare and instead have made it worse. Today’s news reflects the reality, not rhetoric, of this administration’s bad record on Medicare.”

The announcement became an instant campaign issue, with a spokesman for Sen. John F. Kerry, the Democratic presidential challenger, saying that the jump in premiums came after the administration increased deductibles by 10%.

“After doing nothing about the record increases in the cost of healthcare 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,” said spokesman Phil Singer. “When it comes to helping seniors, George Bush has proven that he’s taking us in the wrong direction by giving billions to the drug industry while keeping seniors from accessing cheaper prescription drugs.”

Kerry advocates importing U.S.-made prescription drugs from Canada, where they are sold at lower prices, a stance the administration has resisted. Kerry also backs negotiating with drug companies for lower prices, a tactic rejected by the administration.

Advocates for patients blamed the Medicare Modernization bill pushed by insurance interests, passed by Congress and signed by Bush in December for the higher costs.

“There were a lot of giveaways in the MMA,” said Hayes. “The prescription drug benefit starts in 2006, but the benefits for insurers start immediately.”

McClellan announced other increases for Medicare services Friday. The deductibles for the program’s Part A, which covers inpatient hospital care, skilled nursing facilities and some home healthcare, will rise by $36, to $912 an inpatient admittance and increased per-day costs for lengthy hospitalizations.

McClellan cited three main reasons for the increases: higher payments largely because of extra costs under the modernization bill; extra benefits under the new Medicare Advantage program; and the need to increase reserves in program trust funds.

He said three-fourths of the extra revenue would pay for the extra costs, while the remaining one-fourth would go to the trust fund reserves.

However, McClellan said other changes would reduce costs, including closer screening of prescribed drugs and preventive procedures, including a “Welcome to Medicare” exam for new beneficiaries. McClellan said the reforms reflected in the increases would provide cost savings.

“On net, Medicare beneficiaries are saving money,” he said.

Under federal law, some beneficiaries will be partially protected against the premium jump. The law does not allow premium increases to exceed the cost -of-living adjustment in Social Security checks.

However, Medicare officials said for most beneficiaries, cost-of-living adjustments would be greater than premium increases.