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Medicare participants face 3 percent increase in monthly premiums

WASHINGTON - Elderly and disabled people will see their Medicare premiums rise 3.1 percent next year to $96.40 a month - the lowest increase in six years.

The good news is temporary, though.

The formula used to calculate the premium assumes that physicians will take a 10 percent cut in their reimbursement rates next year, an unlikely occurrence. If, as expected, Congress acts to offset some of that pay cut or to eliminate it, premiums in future years would go up to reflect the additional expense.

Another factor in the lower-than-usual premium increase was the fixing of an accounting error that otherwise would have added $2.50 to beneficiaries' monthly premiums in 2008.

The Medicare program pays for most of the health care received by about 43 million elderly and disabled people. The program's expenses have soared in recent years as health care costs go up faster than most other segments of the economy and as more people join the program.

Beneficiaries will be most concerned about expenses in two key segments of Medicare:

First, there is Medicare Part A, which covers inpatient hospital and hospice care as well as short stays in nursing homes. For this program, participants don't pay a monthly premium. However, they do pay a deductible when they have to go to the hospital. That deductible will increase from $992 to $1,024 next year.

Second, there is Medicare Part B, which covers services received at a doctor's office and in outpatient settings. The program also pays for medical equipment such as wheelchairs and oxygen tanks. About a quarter of the revenue for this program comes from beneficiaries' monthly premiums. The vast majority of participants will pay the $96.40 premium next year, though wealthier participants will pay more.

Kerry Weems, the acting administrator for the Centers for Medicare and Medicaid Services, said that rising demand for health care was the primary driver behind the premium increase. Other factors included higher payments to private insurers and setting aside more money for a reserve fund.

'Even though this is the lowest increase we've seen in six years, we continue to be very concerned about growing health care costs,' Weems said.

Advocacy groups for Medicare beneficiaries responded to the announcement by saying that the federal government could help lower most beneficiaries premiums if it reduced payments to private insurers. The insurers get a subsidy for overseeing the care their customers get. In turn, these insurers, not the federal government, reimburse the health care providers.

'When the government opened Medicare to private plans, the insurance companies promised their efficiency could provide members with more benefits for less than the cost of Medicare,' said David Sloane, director of government relations for AARP, an advocacy group for people 50 and older. 'Now we're paying them too much, and its driving up costs for taxpayers and all people in Medicare.'