Keep Medicare premiums fair
Congress is embroiled in a debate over Medicare while older adults get ready to reach deeper and deeper into their pockets to pay for their health coverage. Medicare beneficiaries are willing to pay their fair share. They expect their premiums to go up, but they should not have to shoulder an extra hike that results from a flawed payment system for doctors.
Medicare pays for doctors’ services according to a national fee schedule. Under current law, Medicare updates doctor fees to keep spending in line with an overall target.
Since 2002, actual spending on doctor services had exceeded the target. That triggers reductions in physician payment rates. With the exception of 2002, Congress has consistently voted to override this mandated reduction in response to physician concerns. As a result, Medicare beneficiaries have paid even higher Medicare premiums and co-pays.
Under this plan, doctor fees were expected to be reduced by 10 percent in 2008. Then late in 2007, Congress approved a temporary six month fix to prevent the reduction in doctor fees. This temporary fix expires at the end of June so Congress will again have to address Medicare’s payment of doctors and beneficiaries could again be forced to dig deeper to pay their Medicare premiums.
Higher premiums: Medicare Part B services include payments for doctors’ services as well as items such as lab tests, imaging services, and doctor-administered drugs. The monthly Part B premium ($96.40 in 2008) is set at 25 percent of Part B spending, so each time Congress overrides the overall spending target, there is a direct increase in cost to Medicare beneficiaries. The Part B premium has more than doubled since 2000.
Erosion of COLAs: Each time the Part B premium is increased it significantly erodes — or even eliminates — the Social Security cost-of-living-adjustment. This is especially true for beneficiaries with lower or moderate incomes.
Higher out of pocket costs: The increases to beneficiaries are not limited to premiums. Their out of pocket costs — usually 20 percent of Medicare’s payment — also jump each time doctor reimbursement rates increase. For each increase of $10 billion in doctor payments, beneficiary co-insurance amounts increase roughly $2 billion.
Erosion of retirement income: The average older American already spends about one quarter of their income on health care. This does not include the additional, and often substantial, costs of services that Medicare does not cover — including long-term home and nursing home care. If the premiums continue to escalate, many beneficiaries will find it hard to pay for the care they need.
So what should Congress do?
Beneficiaries must be protected from unfair Part B premium increases. Medicare beneficiaries have experienced significant premium increases over the past several years. Unfortunately, the 3.1 percent increase for the 2008 premium (from $93.50 per month in 2007 to $96.40 per month in 2008) is artificially low, since it assumes that the 10 percent reduction in doctor payments that is scheduled under current law will occur. Congress’ anticipated action to prevent the physician cut will result in still higher premiums for beneficiaries unless offsetting reductions are made in other parts of the Medicare program. Beneficiaries must be protected from dramatically increasing health care costs.
Congress must protect Medicare. Four million Americans rely on Medicare every day for affordable health coverage. That is why Congress needs to keep premiums fair — so we don’t price millions of older Americans out of health insurance coverage. Large premium increases could discourage people from getting the preventive care and prescription drugs they need, putting further strain on a struggling system when they need more extensive treatment.
Inaction is hurting people in Medicare. It is unfair for beneficiaries and taxpayers to be penalized for the inability of Congress to reform the flawed doctor payment system. Short-term fixes simply exacerbate the problem and make premium increases related to updates even higher. The longer Congress delays fixing the flawed doctor payment system, the harder it is to fix the problem.
Millions of older adults depend on Medicare and need quality care that is affordable. Congress needs to keep Medicare premiums fair by working for a cure rather than putting a Band-Aid on a problem that will only get worse.