Friday, October 30, 2009

Medicare 2010

On October 16, The Centers for Medicare and Medicaid Services (CMS) announced the Medicare premiums and deductibles for 2010.

This announcement contains the usual annual increases in premiums and deductibles. For 2010, the Part A hospital deductible reaches $1,100 per admission. The Part B ambulatory deductible is $155 per year. The Part B monthly premium increases 15% to $110 monthly per participant. (The Part B premium has increased by 41% in just the past 5 years – from $78 to $110. Wow.)

It’s important to recognize that in setting the 2010 Part B premiums, CMS has followed current law. The law includes certain limitations on growth of physician reimbursements. The $110 rate for 2010 reflects these limitations. For 2010 the limitations would reduce present physician reimbursements by 21% (!) Congress has waived these limitations in each of the past 5 years and is expected to waive them again for 2010. Why is this relevant? Because waiving the limitations will require a recalculation of the physician cost, meaning that both the Part B deductible and the Part B premiums will be higher than shown here. Wonderful.

The remainder of this post contains a brief summary of Medicare benefits for 2010. If, or as, you scan this summary (I know, it’s boring) please ask yourself: "would I want to be covered by THIS plan, at THESE rates?"

1. Medicare has many deductibles, all of them are increasing. Values for 2010 are:
a. Part A inpatient deductible = $1,100 per confinement.
•Inpatient benefits are limited to 150 days per confinement.
•Medicare pays inpatient benefits at 100% up to 60 days per confinement after the $1,100 deductible
•Medicare requires a $275 per day deductible from 61-90 days
•Medicare requires a $550 per day deductible from 90-150 days.
•After 150 days – no coverage
b. Part B Medicare deductible for all other types of expenses = $155 per year
2. For these other types, Medicare pays 80% of allowed expenses after the deductible
3. Medicare does not limit the residual expenses (the 20% that you must pay)
4. Medicare will continue to reimburse 80% regardless how large your expenses may grow - and you will continue to pay your 20% - no matter how large that may grow.
5. Medicare does not have a health reimbursement or health savings account.
6. Medicare contains no limit to the share of your own medical costs that you must pay in any year
7. Preventive care is subject to the same deductible and 80% reimbursement
8. Medicare does not cover retail Rx – no prescriptions – unless you buy Part D for an extra premium
9. Medicare does not reimburse any expenses incurred outside the U.S.
12. The Medicare gross premiums (before subsidy) are $461 per month for Part A and $442 per month for Part B, a total of $903 monthly or $10,836 per person, per year. This friends, is what Medicare COSTS.

The Medicare benefits may seem, well, skimpy compared with the relatively high premiums. On the other hand, an older population is expensive to insure, given the numerous chronic conditions and other health issues that people accumulate over a lifetime. This cost is not decreasing, it is increasing. And the government’s response year after year is to reduce benefits (e.g., increase deductibles) and increase premiums - but not to attempt to manage the overall cost. What else could it do? Well, it could aggressively seek out rampant fraud; or implement specific disease-management programs; or help physicians and hospitals identify and eliminate wasteful cost in the system. That’s only three of many possibilities. Oh, but hey, I forgot – Medicare has such a wonderfully low expense ratio in part because it doesn't do these things.

Note: By law, for citizens and legal residents who have at least 40 quarters of Social Security earnings, Medicare subsidizes the cost of the premiums. For the typical Medicare participant, Medicare (i.e., taxpayers) subsidizes 100% of the Part A premiums, and 75% of the Part B premiums. As the result, the typical Medicare participant will pay about $110 monthly in 2010 for Part B. That's equivalent to 12% of the overall Medicare cost. Still, it's an increase of about 15% above the $96 monthly per participant cost of Part B for 2009.
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