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Medicare News
Medicare Part B Premiums to Reach Nearly $100 a
Month in 2007
Medicare looks at rising costs, which project
premium jump over 11%
July 12, 2006 – The hidden message in a fact sheet
issued by the Centers for Medicare and Medicaid Services yesterday is
that Medicare Part B premiums for senior citizens will jump to almost
$100 a month next year. The headline on the CMS fact sheet started with,
"Medicaid Spending Projections Down Again." But the big news is rates
are getting ready to take a double digit jump of over 11 percent. (Read
fact sheet below news story.)
 Medicare Part B Premiums To Increase 11.2% in 2007
to Nearly $100 Per Month, Bush Administration Says
The monthly premium for Medicare Part B will
increase a projected 11.2% next year to at least $98.40, although the
increase might be slightly higher, the Bush administration announced on
Tuesday, the
AP/Seattle
Post-Intelligencer reports.
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The current monthly premium is $88.50 (Freking,
AP/Seattle Post-Intelligencer, 7/11). According to a
CMS fact
sheet released on Tuesday, overall Part B expenditures increased by 11%
in 2005, including a 10% increase in expenditures for physicians'
services and an 11% increase for outpatient hospital services.
"The main reason for these increases in total
expenditures is increases in the volume and intensity of physician and
outpatient hospital services over the last several years," the fact
sheet states, adding, "[R]apid growth in services administered in
physicians' offices is driven by more use of more intensive physicians'
services, including imaging, physician-administered drugs, minor
procedures, physical therapy, dermatology, lab tests, and evaluation and
management services."
According to the fact sheet, "Use of many of these
services varies substantially across practices and geographic areas,
with no clear impacts on patient health" (CMS
release,
7/11).
Increase Could Be Higher
According to the AP/Post-Intelligencer, the estimated increase "assume[s]
that Congress will reduce Medicare payment rates for physicians by about
4.7% next year" (AP/Post-Intelligencer, 7/11). Medicare physician
reimbursements are scheduled to be cut on Jan. 1, 2007, unless Congress
intervenes. Sens. Jon Kyl (R-Ariz.) and Debbie Stabenow (D-Mich.) in a
recent letter to Senate Majority Leader Bill Frist (R-Tenn.) and Senate
Minority Leader Harry Reid (D-Nev.) called on the Senate to increase
Medicare physician reimbursements before it adjourns in October (Kaiser
Daily Health Policy Report, 7/11). If Congress does reverse
the cut, Medicare costs will increase, possibly resulting in higher
monthly premiums, the AP/Post-Intelligencer reports.
Comments
CMS Administrator Mark McClellan said the premium increase is the
result of an increase in the volume of care provided to beneficiaries,
adding, "We can't keep pumping more money into a payment system that is
not sustainable." Kirsten Sloan, chief health lobbyist for
AARP,
said, "We're going on several years of repeated double-digit increases,
and it's also roughly three times the rate of the Social Security
increase." Sloan said Congress should pass legislation that would
increase the use of health care information technology, such as
electronic health records, which she said would slow cost increases and
reduce medical errors (AP/Seattle Post-Intelligencer, 7/11).
CMS Fact Sheet
Medicaid Spending
Projections Down Again, Reflecting Effective Federal and State Steps To
Slow Spending Growth
Summary
Medicaid cost projections are once again declining,
reflecting slower Medicaid spending growth in recent years. For the
fiscal year (FY) 2006-2015 period, projected Federal Medicaid costs are
$224 billion lower than had been projected just a year ago – a reduction
of 8 percent.
This reflects a slowdown in Federal Medicaid
spending growth from over 12 percent per year in fiscal year 2000-2002
to 7.2 percent from 2002-2005, down further to 4.6 percent projected for
fiscal year 2006-2007. State Medicaid spending growth has
simultaneously slowed significantly, with many states projecting lower
costs in FY 2006 than FY 2005. States are also paying much less than
had been predicted for drug coverage for “dual eligible” beneficiaries
who are now getting coverage through Medicare.
The slowdown in Medicaid spending growth has
resulted from many steps to deliver needed benefits more efficiently and
effectively, implemented through innovative waivers and other
collaborations between the States and the Federal government. Reform
has resulted in greater use of private sector health plans rather than
government-run “fee for service” that rewards providers for driving
demand and creating incentives for over utilization. It has also
resulted in more use of community-based long-term care services that
beneficiaries with a disability prefer, and more alternatives to costly
Medicaid-financed nursing home care.
The implementation of the Deficit Reduction Act
provides new opportunities for states to work with the Federal
government to build on the effective reforms to slow spending growth
while providing needed coverage, and doing more to help people get the
kind of care they prefer.
Trends in Medicaid Spending
The projections for federal Medicaid spending from
FY 2007 through FY 2016 for Mid-Session Review 2006 are $53.3 billion
lower than the projections for the President's 2007 Budget. The
projections for FY 2006 through 2015 in the Mid-Session Review 2006 are
$224.4 billion lower than the projections for Mid-Session Review 2005.
This is a decline of 8 percent in projected federal Medicaid spending
over the next ten years.
The projections reflect a significant slowdown in
Medicaid spending growth in recent years. With the recently enacted
reforms in the Deficit Reduction Act to enable states to provide more
flexible and effective benefits for the people they serve, we expect
these savings to continue.
Medicaid federal share spending grew 10.4 percent
from FY 2000 to FY 2001 and 14.0 percent from FY 2001 to FY 2002. Since
then, the rate of growth has been slowed.
From FY 2002 to FY 2005, Medicaid federal share
spending grew at an average rate of 7.2 percent per year.
Medicaid federal share spending is projected to
grow only 1.8 percent from FY 2005 to FY 2006, in part as a result of
the additional Medicaid savings from Medicare-Medicaid “dual eligible”
beneficiaries moving to Medicare drug coverage that is costing
substantially less than had been projected.
Even including the costs of drug coverage for
Medicaid dual eligibles, Medicaid spending for FY 2005 to FY 2006 grew
by less than 5.5 percent. From FY 2006 to FY 2007, Medicaid spending is
projected to grow by 4.6 percent, continuing the trend in recent years
toward lower rates of spending growth.
The reduction in spending growth is occurring even
as more Americans get assistance with their health care costs through
Medicaid and SCHIP. Enrollment in Medicaid is expected to continue to
increase overall.
The slowdown in overall Medicaid spending growth
has not resulted from shifts in Federal to state spending; it has been
the result of Federal support for bipartisan state efforts to provide
needed health care at a more sustainable cost. In FY 2006, 16 states are
projecting to have lower Medicaid expenditures than in FY 2005, as
reflected in their May estimates. These states are a mixture of large,
medium, and small states, as diverse as GA, MD, MI, NH, NV, SC, SD, TX,
and WI. Other large states are also experiencing slower growth.
For example, between FY 2002 and FY 2003 California
’s actual expenditures grew by 11.9 percent, and the state is currently
projecting its expenditures to grow by 1.8 percent between FY 2006 and
FY 2007. Florida ’s actual expenditures between FY 2003 and FY 2004
grew by 17.1 percent, and the state is currently projecting its
expenditures to grow half as quickly, by 8.6 percent, between FY 2006
and FY 2007.
Factors Related to Slowdown in Medicaid Spending
Growth
The substantial slowdown in actual Medicaid
spending growth in recent years, which in turn has resulted in
significant reductions in projected Medicaid spending, is likely related
to a combination of factors:
● State cost containment strategies, supported by
efforts by CMS and expert groups to identify and promote best practices
for delivering benefits effectively and at the lowest cost;
● Federal/state collaboration through waivers and
innovative state plan amendments to deliver services more
effectively—with much more widespread use of effective managed care
coverage and home and community based services for long-term care;
● New tools provided by CMS to states to
substantially reduce the growth in cost of prescription drugs, including
steps to encourage greater use of generics, preferred drug lists, and
multi-state drug purchasing pools.
● Shifting dual-eligibles' drug coverage from
Medicaid to Medicare with the new Medicare drug benefit, with lower
costs to states than had been expected (25 percent lower costs over 10
years than had been projected a year ago) and with states paying a
progressively smaller share of drug costs;
● Increased federal oversight to prevent fraud,
including increased funding of field investigators and enhanced joint
analysis of potential Medicare and Medicaid fraud;
● Steps to assure accountability in financing
needed Medicaid services by ending impermissible “recycling” which
shifted costs to the federal government above allowed matching levels,
which are expected to continue as a result of administrative and
regulatory actions in the President’s budget. These initiatives have
included improved efforts to oversee state claims for federal
reimbursement and improved efforts to identify payment errors, and they
are expected to continue through administrative and regulatory actions
proposed in the President’s budget; and
● Improved economic conditions that have slowed
the projected growth rate of enrollment.
Details: Changes In Medicaid Expenditures By
Service Category
The slowdown in Medicaid spending growth has
resulted from significant changes in how Medicaid pays for services,
with substantial movement away from “fee for service” systems that pay
more for more services, regardless of their quality or impact on patient
health, and toward programs that focus on helping patients manage their
illnesses and prevent complications, and that give beneficiaries more
choice and control in how they receive services.
● In particular, the growth in use of
institution-based care has slowed greatly.
● Expenditures for inpatient hospital care
grew by 13.2 percent between FY 2003 and FY 2004, 7.3 percent between FY
2004 and FY 2005, -0.1 percent between FY 2005 and FY 2006, and states
are projecting just a 2.4 percent increase between FY 2006 and FY 2007.
● Expenditures for nursing home payments
grew by 9.6 percent between FY 2001 and FY 2002, -6.0 percent between FY
2002 and FY 2003, 4.2 percent between FY 2003 and FY 2004, -0.3 percent
between FY 2004 and FY 2005, and states are projecting growth of 5.4
percent between FY 2005 and FY 2006 and 4.7 percent between FY 2006 and
FY 2007.
● Expenditures for outpatient hospital care grew
0.9 percent between FY 2004 and 2005 and states are projecting a
decrease in these expenditures of -4.1 percent between FY 2005 and 2006
and an increase of 1.6 percent between FY 2006 and FY 2007.
● Drug spending growth has declined from a growth
rate of 18.1 percent between FY 2003 and FY 2004 to 7.5 percent between
FY 2004 and FY 2005 and a projected decrease of -17.7 percent between FY
2005 and FY 2006 as a result of decreased spending on dual eligibles.
The slowdown resulted from collaboration between the states and federal
government to implement steps that slowed drug spending prior to the
shift of duals to Medicare, and these steps are expected to continue to
restrain spending growth. As noted above, states are also paying less
than had been expected toward the cost of drug coverage for dual
eligibles in Medicare.
● In contrast, spending has increased more
significantly in areas where services can be delivered more efficiently,
including managed care and home and community based long-term care
services. Spending on Home and Community Based Services is increasing at
an average annual rate of 10.7 spending between FY 2002 to FY 2007 while
the rate of growth for managed care services averages 9.5 percent per
year for the same period..
Deficit Reduction Act Reforms Will Enable States
to Deliver More Effective Medicaid Services
The recently-enacted Deficit Reduction Act is
expected to help slow projected spending growth by providing more
cost-effective access to needed health care services, through steps such
as:
● Providing targeted packages to meet the
specific needs of low-income families without the need for waivers—for
example, disease management for children with asthma and intensive
community services for individuals with mental illness. Meanwhile,
individuals with disabilities and certain other vulnerable populations
cannot be required to leave “regular Medicaid.”
● Enabling families to enroll in the same benefit
package in order to preserve continuity of care. Today, one child may
be in Medicaid, another in SCHIP and the parent in an employer plan.
● Providing premium assistance to help
individuals and their employers pay for employment-related insurance,
which keeps families connected to mainstream private insurance that they
can keep and avoid the costs of replacing employer insurance with
government Medicaid coverage.
● Promoting personal responsibility through
programs such as “Get Healthy” initiatives and Health Opportunity
Accounts. States may increase benefits or lower cost sharing for
individuals participating in personal responsibility agreements.
● For example, as a result of a reform plan
approved in May, Kentucky 's Medicaid coverage now includes special
incentives, called “Get Healthy” Benefits, which are offered to further
encourage healthy behaviors. These “Get Healthy” Benefits may include
additional services such as, dental, vision, nutritional counseling and
smoking cessation programs.
● Enabling individuals with a disability to
return to their homes through the “Money Follows the Person” (MFP)
Rebalancing Demonstration. States will receive an enhanced match rate
for helping individuals who have been in institutions for at least six
months return to their own homes. These reforms have not only been
shown to increase beneficiary satisfaction and quality of life; they
also lower costs per beneficiary, helping states keep Medicaid long-term
care costs down.
● For example, Texas began their MFP
demonstration program in September, 2001, and subsequently expanded it.
As of March 31, 2006, 10,711 people have chosen to leave nursing
facilities, have the institutional funds follow them, and move into the
community. Savings are estimated at about 20 percent of what Texas
previously spent on long-term services and supports when comparing the
cost of a comparable package of nursing home services to the cost of the
services in the community, and, at the same time, individuals in the MFP
program report a higher quality of life.
● Promoting private long term care insurance as
an alternative to Medicaid nursing home coverage, through adopting Long
Term Care Partnership plans.
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