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Medicare announces a small hike in premiums for 2007

WASHINGTON—In the smallest-percentage rate increase since 2001, Medicare monthly premiums for physician care and outpatient hospital services will rise by only $5 in 2007 to $93.50, federal officials announced Tuesday.

At 5.6 percent, the increase for Supplementary Medical Insurance, better known as "Part B" coverage, fell short of the 11 percent hike that Medicare actuaries had projected and of this year's 13.2 percent increase. It's even farther removed from the record 17.4 percent spike last year.

A miscalculation of projected Part B spending is the main reason for the lower-than-expected rate increase, Medicare Administrator Mark McClellan said. Medicare actuaries forecast higher premiums based on an increase in physician claims that resulted from faster processing rather than from a spike in services provided.

The modest rate increase will allow the 38 million-plus seniors enrolled to keep more of their monthly Social Security checks, since the Medicare premiums typically are withheld from those payments.

"For the vast majority of beneficiaries, the amount of the Social Security cost-of-living increase will be substantially greater than the additional (Medicare) premium they will pay," McClellan said.

But affluent Medicare beneficiaries will pay more for their 2007 coverage because of a provision of the 2003 Medicare Modernization Act that calls for premium hikes ranging from 10 percent to 55 percent over the next three years for beneficiaries who earn at least $80,000 a year, or $160,000 for married couples.

Instead of the standard $93.50, those seniors will pay premiums of $106, $124.70, $143.40 or $162.10 per month, depending on their incomes. Roughly 4 percent, or about 1.5 million, of Medicare's recipients are subject to the higher rates.

The new rates mark the first time that Medicare has used income to set premium rates. The move was designed to help shore up Medicare's ailing finances, which are crumbling under pressure from higher health-care costs and a growing number of beneficiaries.

Under the new guidelines, seniors who earn $80,000 to $100,000 a year_ and married couples with incomes of $160,000 to $200,000—will see their premiums increase by 10 percent, or roughly 3 percent a year from 2007 to 2009. They'll pay Part B premiums of $106 in 2007.

Individuals who earn $100,000 to $150,000—and married couples with incomes of $200,000 to $300,000—will see their premiums increase by 25 percent, or roughly 8 percent a year from 2007 to 2009. Their 2007 Part B premiums will increase to $124.70.

Individuals earning $150,000 to $200,000—and couples with incomes of $300,000 to $400,000—will face increases of 40 percent, or about 13 percent a year from 2007 to 2009. That works out to a 2007 monthly premium of $143.40.

Individuals who earn $200,000 or more and couples who earn more than $400,000 face the largest increases. Their Part B premiums will jump 55 percent over the next three years, about 18 percent a year. Their monthly premiums will cost $162.10 in 2007.

The Part B premium increase is based on a formula that assumes a roughly 5 percent reduction in Medicare physician reimbursements in 2007. If Congress moves to freeze or increase those payments to doctors, as it has in recent years, the $93.50 premium wouldn't change and contingency funds would be used to make up the funding shortfalls. But money borrowed from the contingency fund would have to be replenished later, mainly through higher Part B premiums, Medicare officials said.

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(c) 2006, McClatchy-Tribune Information Services.

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