Fwd: [RD] HHS RELEASE--MEDICARE PREMIUM, DEDUCTIBLES FOR 2005

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Date: September 3, 2004

For Release: Immediately

Contact: CMS Public Affairs Office

(202) 690-6145

Headline: HHS ANNOUNCES MEDICARE PREMIUM, DEDUCTIBLES FOR 2005

The Department of Health and Human Services (HHS) today announced the

Medicare premium, deductible and coinsurance amounts to be paid by Medicare

beneficiaries in 2005. The new premiums, approximately the same as the

actuarial forecast published in March for the Medicare Trustees Report,

reflect general growth in health care costs, higher payments to physicians

and Medicare Advantage coordinated care health plans under the Medicare

Modernization Act (MMA), and building trust fund reserves.

Under the MMA, Medicare enrollees are benefiting from improved access to

physician services, new preventive and health screening benefits, more

Medicare Advantage plan choices, and better benefits and/or lower

out-of-pocket costs in many Medicare Advantage plans.

The monthly premium paid by beneficiaries enrolled in Medicare Part B, which

covers physician services, outpatient hospital services, certain home health

services, durable medical equipment and other items, will be $78.20, an

increase of $11.60 over the $66.60 premium in 2004.

" 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, such as the new 'Welcome to Medicare' physical and

screening exams, as well as improved Medicare Advantage plan choices that

reduce beneficiaries' health care costs, " said CMS Administrator Mark B.

McClellan, M.D., Ph.D.

Medicare deductibles and premiums are updated annually in accordance with

formulas set by law. By law, the federal government picks up about 75

percent of the cost of Part B benefits and the Part B premium covers the

remaining 25 percent. About three-fourths of the 2005 increase is due to

additional costs for Part B, and almost one-fourth for building reserves.

The principal contributing factor to the increased cost of Medicare Part B

benefits, accounting for about four-fifths of the higher benefit costs, is

higher payments in Medicare's traditional plan. Most importantly, the

recent Medicare law prevented physician payments from falling significantly.

In 2005, payment rates for physicians will increase by 1.5 percent,

preventing a 4.5 percent reduction that could have threatened access to

high-quality physician services.

Another contributing factor to higher benefit costs is improvement in the

Medicare Advantage program under the MMA. As a result, many beneficiaries

enrolled in Medicare Advantage health plans are expected to receive

additional benefits including prescription drugs, more preventive care, and

even dental and vision care, as well as lower copayments that enable them to

reduce their out of pocket costs.

On average, the premium changes related to Medicare Advantage are more than

offset by reductions in out-of-pocket payments for Medicare Advantage

enrollees. Prior to these benefit improvements, beneficiary out-of-pocket

costs were already lower than in traditional Medicare. In 2003,

beneficiaries without supplemental coverage from employers or Medicaid who

enrolled in Medicare Advantage plans had average out-of-pocket payments that

were approximately $700 lower.

A third contributing factor is increasing the reserves held in the Part B

account of the Medicare Supplementary Medical Insurance Trust Fund toward a

more adequate level. The Medicare law requires adjustments in contributions

from general revenues and premium payments in order to maintain financial

balance in the Part B account.

Two other MMA changes will help lower beneficiaries' out-of-pocket costs in

2005. First, the new Medicare law provides additional savings for Medicare

beneficiaries by paying more appropriately for Medicare covered drugs and

the administration of those covered drugs. Second, the new preventive

benefits in Medicare will help beneficiaries cover the cost of screening

tests for heart disease and diabetes, and will provide a " Welcome to

Medicare " exam (including coverage for associated services) for

beneficiaries entering the program.

The Part B premium increase may not exceed any beneficiary's cost of living

adjustment in their Social Security check. For the great majority of

beneficiaries, the Social Security cost of living increase is likely to be

significantly greater than the premium change.

About 93 percent of Medicare's 41.8 million beneficiaries are enrolled in

Part B, which helps pay for physician services, hospital outpatient care,

durable medical equipment and other services, including some home health

care. These beneficiaries generally pay the monthly premium, or have it

paid on their behalf by Medicaid (including Medicare Savings Program) if

they have limited incomes. Medicaid currently pays some or all of the Part

B premium for about 6.3 million Medicare beneficiaries. Many beneficiaries

with retiree coverage and some beneficiaries in Medicare Advantage plans

also have some or all of these premiums paid on their behalf.

For Medicare Part A, which pays for inpatient hospital, skilled nursing

facility, and some home health care, the deductible paid by the beneficiary

when admitted as a hospital inpatient will be $912 in 2005, an increase of

$36 from this year's $876 deductible. The Part A deductible is the

beneficiary's only cost for up to 60 days of Medicare-covered inpatient

hospital care in a benefit period. Beneficiaries must pay an additional

$228 per day for days 61 through 90 in 2005, and $456 per day for hospital

stays beyond the 90th day in a benefit period. For 2004, per day payment

for days 61 through 90 was $219, and $438 for beyond 90 days.

For beneficiaries in skilled nursing facilities, the daily co-insurance for

days 21 through 100 in a benefit period will be $114 in 2005, compared to

$109.50 in 2004. Those who enroll in Medicare Advantage plans may not be

affected by the Part A increase, and may receive additional benefits with

different cost-sharing arrangements. All of these Part A payment changes

are determined by a statutory formula.

About 99 percent of Medicare beneficiaries do not pay a premium for Part A

services since they have at least 40 quarters of Medicare-covered

employment. However, other seniors and certain persons under age 65 with

disabilities who have fewer than 30 quarters of coverage may obtain Part A

coverage by paying a monthly premium set according to a statutory formula.

This premium will be $375 for 2005, an increase of $32 from 2004. In

addition, seniors with 30 to 39 quarters of coverage, and certain disabled

persons with 30 or more quarters of coverage, pay a reduced premium of $206.

Section 629 of the Medicare Modernization Act of 2003 requires raising the

Part B deductible in 2005 and indexing it thereafter. In 2005, the Part B

deductible will be $110. Beginning January 1, 2006, the deductible will be

indexed to the increase in the average cost of Part B services for aged

beneficiaries.

As noted above, states have programs that pay some or all of beneficiaries'

premiums and coinsurance for certain people who have Medicare and a limited

income. Information is available at 1-800-MEDICARE (1-800-633-4227) and,

for hearing and speech impaired, at TTY/TDD: 1-877-486-2048.

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Note: All HHS press releases, fact sheets and other press materials are

available at http://www.hhs.gov/news.