Medicare Part B premiums set to jump in 2007

Sunday, September 17, 2006

BALTIMORE - The standard Medicare Part B monthly premium will be $93.50 in 2007, an increase of $5 or 5.6% from the current $88.50, CMS reported last week.

The increase is less than the projected 6% increase in per capita national health spending for 2007 and the projected 7% increase for 2007 retail prescription drug spending. In addition, more than one-fourth of beneficiaries can receive assistance that pays for their entire Part B premium, CMS stated.

Premiums and Deductibles for 2007:

Part A Premium: $410 (paid by about 1 percent of beneficiaries)

Part A deductible: $992

Part B standard premium: $93.50

Part B deductible: $131

Growth in traditional fee-for-service Part B spending per capita, and not spending in the Medicare Advantage program, accounts for the bulk of the premium increase. In particular, very rapid growth in spending for hospital outpatient services is a major contributor to the premium increase. Although outpatient hospital spending accounts for only about 13% of total Part B spending, it accounts for one-third of the increase in the 2007 premium. Hospital spending accounts for more of the premium growth than spending growth for physician services and physician-related services, including lab tests and physician-administered drugs, which together account for a greater share of the total Part B spending. While outpatient spending growth has continued rapidly, the growth rate in 2005 spending for physician fee schedule services slowed compared to trends in recent years, though the 2007 projected volume and intensity growth for physician-related services is still high at about 5% .

In 2007, approximately 4% of Medicare Part B enrollees with higher incomes will pay a higher Part B premium based on their income. The income-related Part B premiums for 2007 will be $106.00, $124.70, $143.40, or $162.10, depending on the extent to which an individual beneficiary's income exceeds $80,000 (or a married couple's income exceeds $160,000), with the highest premium rates only paid by less than 1% of beneficiaries whose incomes are over $200,000 (or $400,000 for a married couple). A beneficiary who pays the highest income-related premium in 2007 would pay $1,945 per year in Part B premiums, but is estimated to receive an average of $4,363 in Medicare Part B benefits.