Medicare Compliance & Reimbursement

Intense office visits a cause for increase.

Unfortunately for beneficiaries, it appears there is no end in sight to the spending increases they have endured when paying premiums for Medicare Part B; data suggests spending continued to increase at a higher rate than expected in 2004.

According to a recent study, Centers for Medicare and Medicaid Services actuaries predict that hospital and prescription-drug spending growth will moderate a bit over the next decade, noted administrator Mark McClellan March 25.

But in the annual Medicare Trustees' Report issued March 23, the actuaries have raised their 2004 estimates of how physician spending will grow, predicting now that it will rise by over 10 percent annually for several years.

The big 2004 increase - 15 percent rather than the already high 12 percent that CMS had predicted - came even though physicians received only a 1.5 percent Medicare payment update.

The increase stemmed in largest part from growth in the number and intensity of physician office visits (29 percent), more "minor procedures" by physicians and physical therapists (26 percent), and greater use of imaging services (18 percent), according to a March 31 letter to Medicare Payment Advisory Commission chair Glenn Hackbarth from Herb Kuhn, director of CMS' Center for Medicare Management.

Just why these services increased so much remains mysterious, McClellan told the American Enterprise Institute's annual symposium on the trustees' report.
Going up along with physician spending will be the Part B premiums paid by beneficiaries.

By mid-2004, rising spending had greatly depleted the relatively small cash cushion Medicare maintains to keep the Part B system stable. In hopes of both replenishing the reserve and keeping up with spending increases, CMS raised Part B premiums by over 17 percent for 2005. Between 2004 and 2005, beneficiaries' monthly Part B contributions rose by $11.60 a month, to $78.20.

"Now it looks like we're going to need another large increase for 2006," said head actuary Rick Foster.

Expect A 12-Percent Hike, Or More

A final call on the size of next year's premium will come later this year. But premiums most likely will grow by well over 12 percent. Just to restore reserves, a 12-percent 2006 hike is required, the Trustees' Report says. Such an increase would raise this year's $78.20 monthly premium by around $9.50 to $87.70 next year. And in his letter, Kuhn said CMS now projects the premium to grow even more, to $89.20, next year.
 
But both the trustees' and Kuhn's projections are based on the current statutory formula for Medicare physician payment, which calls for doctors overall to get a 4.3-percent pay cut in 2006. Congress has replaced several previously scheduled cuts with modest increases, and, later this year, legislators are expected to override the formula again for 2006. Thus, Part B premiums could see another increase for 2006 that's comparable to the 17-plus-percent 2005 hike.