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Medicare premiums projected to rise 14% next year

WASHINGTON—Medicare plans to charge seniors 14 percent more for premiums next year and pay doctors about 4 percent less, agency officials said Thursday.

The adjustments are meant to cope with unexpected increases in Medicare's spending on physician visits and outpatient care. Those outlays grew by 15 percent in 2004, not the 12 percent that had been projected, said Medicare chief actuary Richard S. Foster.

"We expected significant growth and got more than that," Foster said.

Both adjustments are preliminary and could worsen as more detailed spending data becomes available, said Medicare administrator Mark McClellan.

Congress can intervene to modify the payments to doctors and is likely to be asked to do so. The Medicare Modernization Act eliminated a 4.3 percent cut in 2004 and replaced it with modest increases of 1.5 percent in 2004 and 2005.

Medicare's monthly beneficiary premiums for doctor visits and outpatient care will rise to $89.20 per month under the revised plan. The current premium for Medicare's so-called Part B program is $78.20 monthly.

The proposed hike comes on the heels of a 17 percent premium hike that was effective in the current year.

Double-digit increases in Medicare premiums, said John Rother, policy director for AARP, are eroding much of the annual two- to three-percent increase in Social Security payments for seniors.

"That disparity speaks for itself. People's Social Security checks are basically being eaten away by these medical costs," Rother said.

At the same time, Medicare expects to pay doctors about 4.3 percent less in 2006 for care provided to Medicare patients, a reduction that the physicians' professional association immediately protested loudly.

"These cuts present a serious threat to access to care for seniors," said Dr. J. James Rohack, board chairman of the American Medical Association. "If these steep cuts go into effect, physicians may have to make hard choices about taking new Medicare patients."

A 2003 survey by the American Society of Family Physicians found that more than one in five family doctors no longer accepted new Medicare patients.

Medicare's payments to doctors are figured annually and based on four factors: medical inflation, enrollee growth, payment changes created by new laws or regulations, and projected annual growth in the gross domestic product.

The Medicare Trustees report last week projected physician payment cuts totaling 26 percent from 2006 through 2011.


According to McClellan, the 15 percent increase in cost of doctor visits and outpatient care in 2004 was driven mainly by: longer and more intensive doctor consultations; increases in minor medical procedures; more use of complex imaging tests like MRI scans; and more laboratory tests and testing. Spending on physician-administered prescriptions grew 11 percent and the cost of major procedures, such as surgeries, grew 5 percent.

Medicare's Supplementary Medical Insurance trust fund, which pays physician and outpatient care _and the new prescription drug benefit beginning in 2006—is financed through beneficiary premiums and federal taxes.

Each year, contributions to the trust fund are adjusted to cover projected spending.


(c) 2005, Knight Ridder/Tribune Information Services.

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