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Medicare Premium to Increase by 13.5 Percent Next Year

October 16, 2003

By ROBERT PEAR

WASHINGTON, Oct. 15 - The Medicare premium will shoot up

next year to $66.60 a month, an increase of 13.5 percent,

or $7.90 a month, the Bush administration said on

Wednesday. That is one of the largest increases in the

history of the program.

Federal officials said the rise resulted from increases in

Medicare spending for doctors' services, outpatient

hospital care and medical equipment used at home by

beneficiaries. Earlier this year, they noted, Congress

increased payments to doctors. The new premium does not

include the cost of new prescription drug benefits, which

would begin in 2006 under legislation that Congress is

working on.

Nor does it reflect a plan to require elderly people with

high incomes to pay higher premiums than other

beneficiaries. House and Senate negotiators working on the

Medicare bill discussed that proposal on Wednesday. A

Republican who attended the meeting said he was " surprised

to see almost unanimous philosophical support for the idea

that we should charge wealthier beneficiaries more. "

The basic Medicare premium is updated each year according

to a statutory formula. It is set at the level needed to

cover about 25 percent of the cost of Part B of Medicare,

which helps pay for doctors' services and outpatient care.

General tax revenues cover the other 75 percent of Part B

costs.

A. Scully, administrator of the federal Centers for

Medicare and Medicaid Services, said the increase in

premiums showed that Congress should give private health

plans a larger role in Medicare. Through such private

plans, he said, beneficiaries " would have access to lower

premiums and lower costs. "

Democrats disagree. They say private plans often cost more

than traditional Medicare.

The monthly Medicare premium started at $3 in 1966, climbed

gradually to $7.20 in 1976, was still under $25 in 1988 and

reached $50 in 2001. The premium will be 33 percent higher

in 2004 than in 2001.

The new premium comes at a time when soaring costs have

prompted many employers to scale back or eliminate health

benefits for retirees. Congressional negotiators said they

expected to provide tax incentives for employees and

employers to set aside money for the cost of retiree health

benefits.

Lawmakers devised the proposal because they were alarmed at

official estimates suggesting that many employers would

reduce or eliminate drug benefits for retirees if Medicare

covered such costs.

" We want to give employers a tax incentive to set aside

money in a separate account for the health costs of

retirees, " said Senator E. Grassley, Republican of

Iowa.

Employers have been lobbying for a similar proposal, which

would create tax breaks for " retiree medical benefits

accounts, " similar to the tax incentives for 401(k)

accounts and individual retirement accounts.

" The tax laws encourage people to put money in pension

plans, but do not create much of an incentive to set aside

money for retiree medical benefits, " said ph J.

gale, an expert on health care at Wyatt

Worldwide, an employee benefit consulting company.

W. Dennett, vice president of the American Benefits

Council, a trade group for employers, said the tax breaks

being considered by Congress would be helpful to employees

at companies of all sizes.

On another issue, the Medicare conference committee has

abandoned an idea championed by conservatives: creation of

an agency to manage Medicare drug benefits and to encourage

elderly people to enroll in private health plans.

Medicare bills passed by the House and the Senate would

have established such an agency, separate from the one that

runs Medicare's traditional fee-for-service program.

Republicans and some Democrats have long complained about

what they see as heavy-handed regulation of the health care

industry by Medicare officials. People who run the

traditional Medicare program have often been unsympathetic

to competing private plans, the critics say.

Senator B. Breaux, Democrat of Louisiana, said the

conferees had discarded the proposal.

Lawmakers said they had concluded that a new agency would

duplicate the existing bureaucracy and would be confusing

and disruptive at a time when the government is trying to

establish an ambitious new program of drug benefits for the

elderly.

Many Democrats have lampooned the idea of a new agency.

Senator Hillary Rodham Clinton, Democrat of New York, said

it was absurd " to be spending money on bureaucrats and

administrators, instead of on drugs for seniors. "

http://www.nytimes.com/2003/10/16/politics/16MEDI.html?ex=1067295696 & ei=1 & en

=6964c8abd2f6528b

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