Kaiser Daily Health News – Oct. 28, 2011

Part B premiums for Medicare beneficiaries will rise less than originally anticipated next year, the Department of Health and Human Services announced Thursday.

For most beneficiaries, premiums will be $99.90 a month in 2012, a $3.50 increase over the $96.40 paid this year by a majority of elderly and disabled beneficiaries. Part B pays for physician visits, hospital outpatient costs and certain other services. Earlier this year, Medicare trustees had predicted that Part B premiums would increase to $106.60 next year.

Officials attributed the premium surprise to several factors, including lower-than-expected use of medical care and slower cost growth. "Some areas of the program where we've had high spikes in the past have been virtually flat in spending growth, so I think today’s announcement just confirms a data trend of much lower utilization and spending growth throughout the Medicare program," said Jonathan Blum, deputy administrator and director for Medicare at the Centers for Medicare and Medicaid Services.

The 2012 increase in Part B premiums will be the first that Medicare beneficiaries have faced in three years due to a federal law that freezes Part B premiums in years when there is no Social Security cost-of-living adjustment (COLA). Earlier this month federal officials announced a 3.6 percent Social Security COLA for next year, the first since 2008. That amounts to about $43 in additional benefits for the average recipient.

It also means that the Part B increase will be spread among all 48 million Medicare beneficiaries rather than just those who enrolled after the freeze, the 4 percent of beneficiaries who pay higher premiums due to income and the roughly 9 million seniors whose premiums are paid by the Medicaid program, the joint federal-state health program for people with low-incomes.

The people who joined Medicare during a year with a premium freeze got good news with the announcement. Those who signed up last year at a standard premium of $115.40 per month will see a $15.50 decrease next year, to the $99.90 level. Higher income Medicare beneficiaries, who must pay extra for Part B coverage, will also see decreases in their monthly premiums compared with this year.

That COLA increase will more than make up for the small increase in Part B premiums for the typical beneficiary, HHS officials said. "Because we've kept next year's premium increase lower than the cost of living adjustment to seniors' Social Security benefits, the typical retired worker will have nearly $40 more per month in their pocket next year," said HHS Secretary Kathleen Sebelius. Helping even more, at least for seniors who do not need hospital care in the year ahead, is a $22 decrease in the annual Part B deductible, which will be $140 in 2012.

Beneficiaries who wind up in the hospital for inpatient care (Medicare Part A) will face a slightly higher deductible, however $1,156 in 2011, an increase of $24 from $1,132 this year.

But seniors in Medicare Advantage (Part C), the largely private plans that cover care through network providers and often include prescription drug benefits, will pay premiums that on average are 4 percent lower in 2012.

Premiums for stand-alone Medicare Part D drug plans are remaining flat for the most part. The latest announcement is positive news for the Obama administration and Democrats, who came under fire last year from Republicans for reducing Medicare spending in the health care law. In 2010, when Republicans condemned the health law Medicare changes, people over 60 voted Republican by the largest margin since the early 1980s; exit polls showed that seniors favored Republicans by 21 percentage points.

Democrats were quick to link the Part B news with the health law. "These reductions are a direct result of the Medicare reforms included in the Affordable Care Act – further affirmation of the positive impact health reform is already having on Americans' pocketbooks," Rep. Pete Stark, D-Calif., said in a statement. "Paired with last week's announcement that Social Security beneficiaries will see a cost-of-living adjustment in 2012, people will finally be getting some economic relief."

Republicans were just as quick to slam that assessment. "The administration is trying to bill this announcement as evidence that Obamacare is working but the reality is just the opposite. Candidate Obama promised to CUT premiums by an average of $2,500 per family – so ANY premium increase by definition means the law has failed to achieve its promised savings," Chris Jacobs, health policy analyst for the Senate’s Republican Policy Committee, wrote in an e-mail.

David Certner, legislative policy director for AARP, said that while the group was pleased with the 2012 Part B premium news, it remains concerned that ongoing deliberations of the bipartisan super committee on Capitol Hill could change the way the Social Security COLA is calculated in the future, resulting in smaller increases for beneficiaries.

The 2012 Part B premium projections assume that Congress will stop a nearly 30 percent payment cut for physicians in January who accept Medicare, Blum said.