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Medicare Premium Spike Would Be Softened By Budget Deal

By Melissa Attias, CQ Roll Call

October 27, 2015 -- Millions of Medicare beneficiaries facing a $54 spike in their monthly premiums next year would only see an estimated $18 increase under the sweeping budget agreement.

About 30 percent of enrollees in Medicare Part B, which covers doctor visits and outpatient services, were expected to see their monthly premiums rise from the current $104.90 to $159.30 in 2016, according to projections in the Medicare trustees report. The other 70 percent of Part B enrollees are protected from an increase by a "hold harmless" provision that prevents their premiums from rising more than their Social Security payments.

The budget agreement would set the 2016 monthly premium rate for the recipients that face the spike at $120, according to a summary circulated on Capitol Hill, with an additional $3 surcharge.

The deal also would alleviate an increase in the Part B deductible for all beneficiaries, lowering it from a projected $223 to $167.

The money would come from a loan to the supplemental medical insurance trust fund that would be repaid starting in 2016, by imposing the $3 monthly surcharge on beneficiaries who aren't protected by the hold harmless. The $3 fee could taper off in later years if the loan is close to being repaid and would be imposed on all beneficiaries in years that the hold harmless isn't in play.

Medicare beneficiaries who currently pay higher premiums because of higher incomes would have to pay more than $3, with the amount increasing according to the proportion of premiums they pay under current law. In addition to higher-income beneficiaries, the cohort not protected by the hold harmless clause includes new Medicare enrollees, those who do not receive Social Security checks, and low-income seniors enrolled in both Medicare and Medicaid who have their premiums paid by the states.

Under the budget agreement, the fix would occur again if there is no Social Security cost-of-living adjustment increase for 2017, which is what spurred the expected spike for next year.

"Millions of beneficiaries and state governments with already limited budgets will now not have to bear the brunt of a policy anomaly," said Energy and Commerce Committee top Democrat Frank Pallone Jr. of New Jersey.  "I am pleased we were able to come together, in a bipartisan way, to protect beneficiaries from this drastic hike."

Seniors' groups largely accepted the change. The AARP expressed strong support for the deal.

"We would have preferred no increase to Medicare Part B premiums; however, limiting the increases of those who are not 'held harmless' is a step in the right direction," said Richard Fiesta, Executive Director of the Alliance for Retired Americans.

The budget deal also draws a handful of savings from government health care programs, including a one-year extension of the sequester cuts for Medicare that's projected to save around $11 billion over a decade.

Another provision would prevent off-campus physicians' offices that are purchased by hospitals after the measure's enactment from billing under the hospital outpatient system, which provides a higher reimbursement rate than what is paid to typical doctors' offices. That's expected to save around $9.3 billion.

Another change is designed to extend the existing requirement for brand-name drug manufacturers to pay a rebate to Medicaid if the price of medicines rises faster than inflation to generic drugs as well, which is projected to save about $1 billion over 10 years. 

Chip Davis, president and CEO of the Generic Pharmaceutical Association, slammed the language in a statement. "Policymakers who are serious about keeping prescription drugs affordable for Americans should reject the provisions in today's budget proposal dealing with Medicaid rebates that could eviscerate already strained state budgets and limit patient access to lower-cost generics," he said. 

In addition, the deal would repeal a yet-to-be enforced provision in the 2010 health care law that requires large employers to automatically enroll new full-time employees in coverage. The provision was also included in the budget reconciliation package (HR 3762) that the House passed last week and was estimated to save $7.9 billion over a decade.

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