Congress and Obama Administration Seek Ways to Limit Increase in Medicare Premiums

By Robert Pear, New York Times, October 05, 2015

WASHINGTON — Congress and the Obama administration are frantically seeking ways to hold down Medicare premiums that could rise by roughly 50 percent for some beneficiaries next year, according to lawmakers and Medicare officials.

The administration has criticized commercial insurance companies for seeking rate increases much smaller than that.

Aides to Representative Nancy Pelosi of California, the House Democratic leader, and Speaker John A. Boehner are quietly exploring a possible deal that would limit the expected increase in Medicare premiums.

“Congress has a responsibility to act,” Ms. Pelosi said by email on Monday. “If we do nothing, millions of American seniors will suffer. Democrats continue to press the Republican leadership to bring a fix to the floor so we can prevent the serious harm this increase will have.”

The cost of avoiding such big premium increases, $7.5 billion by some estimates, could be a problem for conservative Republicans. Aides to Mr. Boehner have told Ms. Pelosi’s staff members that the cost would have to be offset by savings elsewhere in the federal budget.

White House officials have discussed the issue with congressional aides, but said they were also considering administrative action to moderate the increase in premiums, perhaps by using a Medicare contingency fund. It is unclear how much they might do on their own.

“We share the goal of keeping Medicare’s premiums affordable, are exploring all options, and appreciate the interest and ideas of members of Congress,” said Katie Hill, a White House spokeswoman.

Premium increases could affect about 30 percent of the 51 million people enrolled in Part B of Medicare, which covers doctors’ services, outpatient hospital services, some home health care and other items. Spending for these services grew slightly more than expected last year, officials said.

Republicans worry that Democrats will depict them as waging a “war on seniors” if they do not go along with legislation to soften the effect of any premium increase, perhaps by using general revenue to plug the gap. A struggle over Medicare would add to fights expected this fall over legislation to raise the federal debt ceiling, prevent a government shutdown and keep money flowing for highway projects.

Medicare officials are scheduled to announce the 2016 premiums this month, after the federal Bureau of Labor Statistics releases data on consumer prices. Medicare’s annual open enrollment period, during which people can change their coverage, begins on Oct. 15.

Under federal law, Medicare premiums are linked closely to Social Security benefits. Inflation has been so low that Social Security beneficiaries may not receive a cost-of-living adjustment next year, federal officials said. For most Medicare beneficiaries, that means that their premiums will stay the same.

But 30 percent of Medicare beneficiaries are not protected against higher premiums. Medicare actuaries predicted in July that the standard premium for them would rise to $159 a month. The standard premium is now just under $105 a month, the same as in 2013 and 2014.

The actuaries also predicted an increase in the annual deductible — the amount that beneficiaries pay for health care before Medicare begins to pay. They estimated that the deductible would rise to $223 next year, from $147 in 2015.

Seventy national organizations, including AARP, labor unions and trade associations for health insurance companies, sent a letter to congressional leaders last week calling for swift action to “mitigate projected increases in Medicare premiums.”

“Older adults and people with disabilities cannot shoulder these unprecedented increases,” said Joe Baker, president of the Medicare Rights Center, a consumer organization that coordinated work on the letter. “Half of all people with Medicare are living on annual incomes of $24,150 or less.”

The formula for setting Medicare premiums is prescribed by law. The secretary of health and human services, Sylvia Mathews Burwell, has some discretion. She can decide whether to reduce or build up Medicare’s “contingency reserve,” which serves as a cushion in case actual spending is higher than was projected. However, the contingency fund is already lower than the level recommended by Medicare actuaries.

Most people on Medicare have their premiums deducted from their monthly Social Security checks. To protect older Americans, federal law stipulates that, in most cases, the increase in a person’s Medicare premium cannot exceed the increase in the person’s Social Security benefit. The purpose of this “hold harmless” provision is to prevent a reduction in Social Security benefits.

Several groups of people do not have this protection and would be subject to higher premiums. They include certain high-income Medicare beneficiaries who are already required to pay higher premiums, lower-income people eligible for both Medicare and Medicaid, new beneficiaries, and those who do not receive Social Security checks.

Premiums are supposed to cover about one-fourth of the projected cost of Part B of Medicare, with general revenues accounting for the remainder. If premiums are frozen for 70 percent of beneficiaries, premiums for the other 30 percent must be raised more to cover the expected increase in overall Medicare costs. In other words, officials said, the higher Medicare costs must be spread across a smaller group of people.

State officials have begun to worry about the possible increase in premiums because state Medicaid programs pay the Medicare premiums for low-income people who are in both programs.

“This is a huge issue for states,” said Matt D. Salo, the executive director of the National Association of Medicaid Directors, which represents state officials. “To finance Medicare, the federal government would shift billions of dollars in costs to state Medicaid programs already struggling with hepatitis C, long-term care and other challenges. That’s a horrible policy.”

Medicare beneficiaries with annual incomes greater than $85,000 already pay more than the standard premium. The most affluent ones — those with incomes over $214,000 a year — pay premiums of about $335 a month. If there is no cost-of-living adjustment for Social Security, their Medicare premiums next year could exceed $500 a month, according to the annual report of the Medicare trustees, issued in July.

Over all, Medicare spending per beneficiary rose just 2.3 percent in 2014, continuing the exceptionally slow growth rates of recent years.

But in their report, the Medicare trustees said that “Part B expenditures were higher in 2014 and are projected to be higher in 2015 than they were expected to be” when the government set premiums a year ago.

http://www.nytimes.com/2015/10/06/us/congress-and-obama-administration-seek-ways-to-limit-increase-in-medicare-premiums.html?emc=edit_tnt_20151005&nlid=58462464&tntemail0=y&_r=1

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