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Category: Other Content: Medicare Costs Estimates Made to Congress were Seriously Understated From the San Francisco Chronicle, Saturday, September 4, 2004 Victoria Colliver, Chronicle Staff Writer Medicare premiums will rise 17.4 percent next year, or $11.60 a month, the largest dollar increase in the program's 40-year history, the U.S. Health and Human Services Department said Friday. The monthly payment for Part B of the program, which covers doctor visits and other nonhospital services, will increase to $78.20 in 2005 from $66.60 this year. Typically the money for the premiums comes directly out of the Social Security checks of senior and disabled Americans. The Bush administration said the increase reflects general growth in health care costs plus higher payments to physicians and health plans under the new Medicare reform law, which created a Medicare prescription drug benefit. About 41.8 million Americans are covered by Medicare. Senior health care advocates slammed the premium increases. The rise will be especially tough on seniors with fixed incomes, said Robert Hayes, president of the Medicare Rights Center in New York, a not-for-profit consumer advocacy group. "Our concern is for the millions of older Americans who struggle to choose between food, housing and health care," he said. In its announcement of the increase in premiums, the Health and Human Services Department also said Medicare is adding new benefits. Medicare's new prescription drug program will reduce out-of-pocket costs for many seniors, officials said. "The new premiums reflect an enhanced Medicare that is providing seniors and people with disabilities with strengthened access to physician services and new preventive benefits," Dr. Mark McClellan, administrator of the federal Centers for Medicare and Medicaid Services, said in a statement. McClellan said new preventive health services that Medicare will begin covering in 2005, including a physical for those who become eligible for Medicare and screening for diabetes, will help save money for beneficiaries, according to the Associated Press. "On net, Medicare beneficiaries are saving money," McClellan said. The government also said that for Medicare Part A, which pays for inpatient hospitalization, skilled nursing facilities and some home health care, the deductible will rise to $912 next year, an increase of $36. Democrats criticized the jump in Medicare costs. "Record-high Medicare premium increases, coupled with an increase in the deductible, will make it even harder for those on fixed incomes to access Medicare benefits," said Rep. Pete Stark, D-Fremont, in a statement. Medicare's federal administrators recalculate premiums every year based on a formula established by law. Beneficiaries pay about a quarter of the cost of Part B services. About 93 percent of the program's beneficiaries participate in Part B. Under the federal program, beneficiaries may be on a pure Medicare policy, which covers about 80 percent of health services. Alternatively, they may purchase a Medicare health maintenance organization plan or supplemental policy to cover additional expenses. In California, about 25 percent of the state's 4.4 million Medicare beneficiaries belong to a Medicare managed-care plan, typically referred to as a Medicare HMO. The federal government is encouraging the growth of these partly privatized managed-care plans. Earlier this year, it increased the funding directed to these private programs. As a result, some seniors saw modest decreases in monthly premiums, unusual in these times of skyrocketing rates. Friday's news will increase the premium for virtually all Medicare beneficiaries, whether they are enrolled in traditional Medicare or a Medicare HMO. "It's kind of like a hidden tax on seniors," said David Grant, director of health policy for Senior Action Network, an advocacy group based in San Francisco. He said California seniors will pay about $612 million more this year in premiums. California health insurers said Friday that they hadn't had enough time to evaluate how the premium increase may affect members of Medicare HMO or supplemental policies. "There could potentially be changes in the future," said Michael Chee, spokesman for Blue Cross of California, referring to possible increases in premiums, deductibles and copayments. Some health care advocates questioned why the government chose late Friday before the Labor Day weekend to release the information. Last month, the Bush administration faced similar criticism for releasing news about jumps in the number of Americans living in poverty or without health insurance during August, a month ahead of schedule. "I'm so mad at them for doing this on a Friday (before a three-day weekend) with the hurricane coming in," said Hayes of the Medicare Rights Center, referring to incoming Hurricane Frances that has led to large-scale evacuations in Florida. McClellan denied any effort to manipulate the timing of the release. "We're getting these numbers out as soon as we can," he told the Associated Press. The Associated Press contributed to this report. E-mail Victoria Colliver at vcolliver@sfchronicle.com