Increase in 2012 Medicare premiums will be less than expected

Lower utilization of physician services keeps patient fees from rising to levels projected in May.

By Charles Fiegl — Posted Nov. 3, 2011

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Patient fees under the Medicare program for 2012 will be restrained by lower utilization rates of physician and other health services, according to Centers for Medicare & Medicaid Services officials.

The lower-than-expected utilization means Medicare outpatient premiums will rise more modestly in 2012, CMS announced Oct. 27. Standard Part B premiums had been projected to increase to $106.60 a month, but instead will rise to $99.90 next year. The standard premium is $96.40 in 2011.

Standard premiums are set so that they cover 25% of projected Medicare costs. Higher-income seniors pay higher premium amounts based on a sliding scale.

At the same time, the Medicare Part B deductible will decrease to $140 in 2012 from $166 in 2011. The deductible is set by Medicare law to reflect one-half of the total estimated per-enrollee cost of benefits and administrative expenses. The calculations also assume that Congress will override a nearly 30% cut to Medicare physician pay that is set to take effect in 2012.

Several factors prevented premiums from increasing to levels forecast by Medicare trustees in May, said CMS Deputy Administrator Jonathan Blum. But for the most part, both fee-for-service and the private plans under Medicare Advantage have seen lower utilization of services, which keeps premiums down, he said. "It's been happening throughout the Medicare program, but in some areas of the program where we've had high spikes in the past we have been virtually flat in spending growth."

Recent studies have found that patient visits to physician offices have declined across the national health system. A September report from the U.S. Bureau of Labor Statistics showed spending on medical services, which includes office visits, decreased almost 2% in 2010.

A majority of Medicare beneficiaries have paid $96.40 premiums every year since 2008 because federal statute freezes rates when beneficiaries don't receive cost-of-living increases from Social Security. Retired workers will be receiving an average cost-of-living adjustment of $43 a month in 2012, CMS said.

Patient advocacy groups said they were pleased that Medicare fees would be lower than projected. David Certner, legislative policy director for AARP, said Medicare's announcement was good news for beneficiaries.

"Millions of America's seniors are struggling with higher expenses -- particularly higher health care costs, lower incomes, depleted savings and reduced home equity or homes lost to foreclosure, and this small increase is welcome news," Certner said.

In 2012, the Part A deductible for hospital services will increase to $1,156 from $1,132. The inpatient premium will increase by $1 to $24 a month.

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