2004 Medicare Premium Increase May Be Biggest in Decade

March 28, 2003
It's expected that Medicare premiums will increase 12.4 percent next year -- the largest increase in 11 years.

Richard Foster, chief actuary for Medicare, says Medicare spending "surged unexpectedly" last year. In addition to the $7.30 monthly increase faced by Medicare beneficiaries, the program may decrease payments to physicians by 4.2 percent next year, officials said.

Beneficiaries now pay $58.70 monthly. If Foster's prediction is correct, that figure will increase to $66.00 in January, 2004.

The reduction in physician reimbursement is expected to occur despite Congress' setting money aside in the recently enacted fiscal year 2003 omnibus spending bill to avoid such cuts. That legislation, signed into law on February 20, includes a provision that provides $54 billion to increase Medicare reimbursement to physicians and hospitals over the next 10 years and a provision to eliminate a 4.4 percent reduction in Medicare physician reimbursement rates that was to go into effect March 1.

But CMS Administrator Tom Scully said that the fee reduction is offset by a "stunning 8 percent increase in the volume" of physician services performed last year for Medicare beneficiaries.

Medicare last year paid $45 billion in reimbursements, an increase of $3 billion, or 7 percent, even though the average fee for each service was reduced. However, Dr. Yank Coble, president of the American Medical Association, said the formula penalizes physicians if services to Medicare patients grow more rapidly than the gross domestic product.

"Health care needs of America's seniors don't change with the ups and downs of the economy," foster said.