WASHINGTON -- Medicare premiums will rise next year by 13.5 percent to $66.60 a month for about 40 million Americans in the program, the third-largest increase in its history, the government said yesterday.
Reflecting rapidly escalating health care costs, the $7.90-per-month increase in premiums is for the part of Medicare that pays doctor visits and other expenses outside of hospital care.
This year's increase was 8.7 percent, to $58.70 a month.
The annual increases are mandated by Congress, which required that participants' premiums cover one-fourth of the overall cost of the health care program for seniors.
Meanwhile, key lawmakers in Congress working on a prescription drug bill moved closer to a consensus to require higher-income seniors to pay more than other beneficiaries for health coverage under Medicare. If enacted, that would mark a historic policy shift for a program that has always provided a standard benefit at a fixed price for every participant.
When Medicare began in 1967, premiums were set at $3 a month.
The largest premium increase was in 1988, at 38.5 percent, followed by 1993, when the jump was 15.1 percent.
The Bush administration said next year's large increase intensifies the need to reform the system.
The Medicare premium increase is likely to erode much of the modest cost-of-living adjustment that Social Security recipients will receive next year. Economists expect the adjustment, based on inflation, will be about 2 percent. The government is to announce the increase today.
AARP, formerly the American Association of Retired Persons, said Congress should not approve additional payments to medical providers until it passes a prescription drug benefit. When the cost of the program rises, participants end up footing more of the bill.
The large rise in premiums "emphasizes even more why action on a drug benefit is critical this year," said Kirsten Sloan, AARP national coordinator for health issues.
In Congress, lawmakers are working on compromise legislation to add a prescription drug benefit to Medicare and overhaul the basic health care program.
Republicans want to inject competition into Medicare by inviting private insurers to compete for seniors' health care dollars, arguing that would modernize the 38-year-old government program and hold down future government spending. Both parties are eager to send a bill to President Bush.