The official 2010 Medicare premiums and deductibles for Part A (hospital services) and Part B (doctor and non-hospital expenses) have been released by the Centers for Medicare & Medicaid Services (CMS). It would be difficult to make up a scenario more confusing than the one facing Medicare beneficiaries. Even CMS says it hopes some of the announced rate changes never come to pass, and it supports a Congressional proposal to avoid any increases in premiums next year for these basic services covered by Medicare. Until Congress decides otherwise, however, here is how 2010 looks:
Part A. In addition to inpatient hospital services, Part A covers qualifying expenses in skilled nursing facilities, hospice, and some home health services. People with at least 40 quarters of employment don't have to pay Part A premiums, and that's 99 percent of us. Everyone, however, faces deductibles. For 2010, they will include $1,100 for a hospital stay, up $32 from $1,068 this year. For longer hospital and nursing-home stays, beneficiaries must pay $275 a day for days 61 through 90 (up from $267 this year). If you need to stay longer than 90 days, there is a lifetime reserve bank with 60 days. For these reserve days, the 2010 deductible is $550 per day, up from $534 this year. Daily co-insurance for days 21 through 100 in a skilled nursing home will be $137.50 in 2010, up from $133.50 in 2009. (Medicare does not cover longer nursing-facility stays.)
Part B. In addition to physician services, Part B covers qualifying out-patient hospital care, durable medical equipment, and some other services. There's a Part B deductible, which is being raised to $155 next year from $135 this year. But it's in the premium calculations for 2010 that Part B gets very complicated.
There is a rule that Part B premiums for most people (73 percent of all Medicare beneficiaries) can't rise by more than the rate of increase in the annual COLA for Social Security recipients. In 2010, there is no COLA because of low rates of inflation. So under this "hold harmless" clause, the $96.40 monthly rate charged this year will stay the same in 2010. However, Medicare does need to raise its rates. That's because another rule says that Part B premiums paid by beneficiaries must equal at least 25 percent of total Part B expenses; the other 75 percent is paid directly by the government. Because of continuing healthcare price inflation, CMS must hike Part B premiums on the other 27 percent of recipients to make sure the program continues to collect 25 percent of its overall expenses in premiums. [See Social Security Makes the Call: No 2010 COLA.]
The group of unprotected beneficiaries includes people who will enroll in Medicare for the first time in 2010 (3 percent), higher-income households that already pay higher premiums because of their incomes (5 percent), and people who don't have their Medicare premiums withheld from their Social Security benefit payments (19 percent, consisting mostly of people whose premiums are paid by Medicaid). For these people, the basic Part B premium is scheduled to rise 15 percent to $110.50 per month next year.
Higher-income households (annual taxable incomes above $170,000 for joint returns and above $85,000 for individual returns) also will pay 15 percent more each month:
While it may be hard to shed a tear for households making more than $300,000 or $400,000 a year, the 15 percent rise in premiums is yet another body blow to the states, which share Medicaid expenses and which are already running huge budget deficits. They would be on the hook for the group of largely lower-income Medicare beneficiaries whose premiums are paid by Medicaid. The U.S. House of Representatives already has passed a bill that would void the 15 percent increases, and it awaits action in the Senate.
In addition, there is more uncertainty for Part B because of the formula used to determine physician fees. Each year since 2003, Congress has overridden cuts in those fees mandated by a Medicare formula. Under this formula, CMS says, physician fees would need to be cut 21 percent in 2010. No one expects those cuts to occur, but the amount of the money at stake has become such a big number that the issue is entangled in the debate over healthcare reform. [See How to Use New Medicare Hospital Tools.]