Mark B. McClellan, head of the Centers for Medicare and Medicaid Services said that the standard monthly premium for Part B covering doctor visits and outpatient hospital care, will rise to $93.50 from $88.50 this year.
Individuals with an annual income of more than $80,000 (or more than $160,000 for married couples) will pay monthly premiums of $106 to $162.10, depending on income.
According to a change instituted by Congress as part of the 2003 law that created the Medicare drug benefit about 1.5 million of the 42 million Americans on Medicare will have to pay the higher premiums based on income,. McClellan has said that the income-based premiums will save the financially troubled program $7.7 billion over five years and more than $20 billion over a decade.
He said that even at the increased rates, Medicare remains a good deal because when the affluent beneficiaries, with individual incomes of over $200,000 a year pay just $2,000 a year in premiums they receive an average of $4,300 a year in benefits.
McClellan said, "That still makes it a very attractive insurance package."
The leader of one senior group organization predicted that with the higher premiums some of the more affluent seniors might be deterred, thereby undermining Medicare's broad political support and its finances.
Shannon Benton, executive director of the Senior Citizens League, an advocacy group with 1.2 million members said, "As healthier and wealthier seniors see their premiums rise, we fear that when that premium equals what they could pay for regular health insurance, why be in the program at all? We feel that eventually the sickest, the oldest and the poorest are going to be the ones left behind in Medicare, and their costs are going to go up significantly to sustain the program."
Medicare officials predicted some 9,000 people to drop out of the program next year owing to the new income-based premiums, and 30,000 to leave by 2010. However they said overall, that's not a lot.
McClellan said, "I don't see any substantial adverse impacts on participation in Medicare, and I definitely see a very positive impact on making Medicare sustainable for the long term."
McClellan said that Medicare officials had been projecting an even higher increase in the standard premium, but there has been an unexpected slowing in the volume of services and tests that doctors are ordering for their Medicare patients.
According to officials the standard premium increase of 5.6 percent is the smallest since 2001. They said that it trails the projected 6 percent increase in per capita health spending next year and a projected 7 percent increase in prescription drug spending. McClellan said that average premiums in the Medicare drug benefit, known as Part D, are predicted to remain flat in 2007.
McClellan said if Congress were to repeal a planned 5.1 percent cut in Medicare payments to physicians next year the Part B standard premium would have to go up by $1.50 in 2008 (in addition to routine annual premium increases).
Kirsten Sloan, the organization's national coordinator for health said, "The fact that the premium is a little less than originally projected is good news, but . . . we may simply be forestalling higher costs to beneficiaries."