U.S. Plans Record Rise in Medicare Premium

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http://www.nytimes.com/2004/09/04/politics/04health.html

 

September 4, 2004

Citing Higher Costs, U.S. Plans Record Rise in

Medicare Premium

By GARDINER HARRIS

 

WASHINGTON, Sept. 3 - A day after President Bush

heralded his efforts to help the elderly cope with

increased medical expenses, federal officials

announced the largest premium increase in dollars in

the Medicare program's history, raising the monthly

expense by $11.60 to $78.20.

 

The increase, which amounts to 17 percent, results

largely from increased payments to doctors and

reflects rising medical expenses generally, officials

said. The rise has nothing to do with a program that

will start in 2006 to offer prescription drugs, for

which beneficiaries must pay a separate premium.

 

The increase immediately became grist for an

increasingly contentious presidential campaign. Phil

Singer, a spokesman for the Kerry campaign, released a

statement saying, " After doing nothing about the

record increases in the cost of health care over the

last four years, George Bush is presiding over a

Medicare system that is socking seniors with the

largest premium hike in the program's 40-year

history. "

 

Scott Stanzel, a spokesman for the Bush campaign, said

that " President Bush has worked to increase health

care access and affordability, including guaranteeing

Medicare recipients prescription drugs. "

 

Dr. Mark McClellan, administrator of the Medicare

program, said in an interview that the elderly were

receiving improved benefits now and would l have lower

out-of-pocket expenses when the new drug benefit began

in 2006. Dr. McClellan pointed out that Medicare

recently instituted a " Welcome to Medicare " physical

and screening program, giving the elderly more for

their money.

 

When Dr. McClellan's predecessor, Thomas A. Scully,

announced last year's 14-percent premium increase, he

said the increase demonstrated that Congress should

give private health plans a larger role in Medicare.

Through such private plans, Mr. Scully said,

beneficiaries " would have access to lower premiums and

lower costs. "

 

Dr. McClellan acknowledged that about $1.75 of this

year's $11.60 premium increase results from the

billions of dollars Medicare is paying insurers to

encourage them to offer private plans. Many in

Congress refused last year to support the new Medicare

drug benefit legislation unless the program did more

to lure patients into such private plans.

 

As Medicare cut costs in recent years, many private

health insurers bowed out of the program, leading the

number of beneficiaries in private plans to drop to

4.6 million last year, or 11 percent of the

beneficiaries, from 6.3 million, or 16 percent of

beneficiaries, in 1999. With higher administrative

costs, private plans are generally more costly than

regular Medicare and thus need subsidies to provide

services.

 

Dr. McClellan pointed out that private plans often

offer additional benefits, including prescription

drugs, more preventive care and even dental and vision

care. Copayments in the private plans are often lower,

he said.

 

By law, the federal Medicare program picks up the cost

of about 75 percent of the Part B Medicare program,

which pays for physician services, hospital outpatient

care and medical equipment. Premiums pay for the

remaining 25 percent. A significant part of the

increased premium announced on Friday will also go to

bolster the Medicare trust fund, a short-term reserve

used to pay benefits, Dr. McClellan said.

 

Most beneficiaries pay their Medicare premiums through

deductions from their Social Security checks. In years

past, the premium increases have been announced in

October at the same time that cost-of-living increases

to Social Security checks are announced. The twin

announcements allow the elderly to calculate how much

they will be receiving the following year.

 

Dr. McClellan said politics played no role in the

decision to announce the increase late Friday

afternoon, just as much of official Washington was

heading out for a three-day weekend and the Republican

convention and a hurricane moving toward Florida were

dominating the news. He said he simply wanted to make

the announcement as soon as he had the information.

 

Representative Pete Stark, Democrat of California,

scoffed at Dr. McClellan's explanation for the

announcement's timing and said, " This is a cynical

attempt to bury bad news by leaking it out when you

hope no one is watching. "

 

Robert Hayes, the president of the Medicare Rights

Center, an advocacy group, said the premium increase

would be a " body blow " to the elderly and resulted

from " profligate management of Medicare. "

 

Medical costs have been rising faster than inflation

for more than a decade, reflecting innovations and

better care for patients. Medicare is not immune to

such increases, although program administrators have

long tried to slow such increases with measures that

often amount to price controls. These controls have so

enraged many health care providers that they appeal

directly to Congress, where doctor groups and others

have sought more money for treatments. Such appeals

led Congress last year to roll back expected cuts in

many payments to doctors and instead to order that

such payments increase 1.5 percent, an important

reason for this year's premium increase.

 

The latest group to make such an appeal is cancer

doctors, who say Medicare will soon sharply reduce

payments to them under a new system that changes the

way Medicare pays for cancer drugs. Some oncologists

have threatened to reduce services to patients or give

them older, more toxic therapies unless Congress

increases payments to them.

 

Copyright 2004 The New York Times Company