2005 MEDICARE PREMIUMS INCREASE SIGNIFICANTLY

Last week the Centers for Medicare & Medicaid Services announced substantial increases in the Medicare premium, co-insurance and deductible rates.  These increases, which become effective January 1, 2005, will place a greater financial burden on the shoulders of the disabled and senior population, many of whom have limited financial resources.  In 2001, the median family income of Medicare beneficiaries was only $20,600.

The most significant increase is in the Medicare Part B premium, which will increase 17%, raising the monthly premium amount from $66.60 to $78.20­­- the greatest increase in the program’s history.  In addition, the Part B deductible, which has remained at $100 per year for the last several years, will increase to $110 per year and will increase annually thereafter.  The deductible for inpatient hospital care will increase from $876.00 to $912.00 and co-insurance amounts for hospitalizations beyond 60 days will also increase from $219 to $228 per day.  Hospitalizations lasting more than 90 days will have an increased co-insurance amount of $456 per day, up $18 from 2004.

For those beneficiaries who buy in to Medicare Part A, the monthly Part A premium will also increase.  This includes individuals who have not earned sufficient numbers of Social Security credits.  For individuals who have 29 or fewer quarters of Social Security credit the monthly premium will be $375.  For those with 30 or more quarters of Social Security credit, the premium will be $206 per month. 

Contrary to common misunderstandings, the extraordinary Part B premium increase is not a result of new benefits added to the Medicare program by the Medicare Act of 2003, nor is it due to efforts to improve the solvency of the Medicare Part A program.  This is because the Medicare drug benefit will be financed though an additional premium, estimated to be $35 per month and the Medicare Trust Fund, which finances the Medicare Part A program.  The Medicare Part A program does not receive income from Medicare Part B premiums, but rather shared contributions made by employers and  employees. 

2005 Medicare Cost-Sharing Rates

Part A:Hospital Deductible: $912                    

            Hospital Coinsurance:              

1^st through 60^th day                   $0

                                    61^st through 90^th day                 $228 per day

                                    90^th through 150^th day              $456 per day

            Skilled Nursing Facility Coinsurance:

                                    1^st through 20^th day                   $0

                                    21^st through 100^th day               $114.00 per day

            Part A Premium (for voluntary enrollees only):

                                    $375 per month (29 or fewer quarters of Social Security coverage)

                                    $206 per month (30 or more quarters of Social Security coverage)

Part B:Deductible:        $110 per year

            Premium:          $78.20 per month

Copyright © Center for Medicare Advocacy, Inc. 05/02/2008