There is also no indication that these trends are likely to change. Focusing on changes over the last year, the overall Consumer Price Index (CPI-W) rose 4.8 percent. At the same time, physician care prices rose 7.5 percent; prescription drug prices rose 8.7 percent; and hospital room prices rose the most, a 10.0 percent increase from 1988 to 1989. Overall, the composite medical care price index rose 7.6 percent -- over one and one-half times faster than the Consumer Price Index (CPI-W). - PREMIUMS, PHYSICIAN FEES. Recent data released by the American Medical Association ("Socioeconomic Characteristics of Medical Practice 1989", AMA, 1990) provides further detail to increases in physician fees. Their numbers are slightly lower but fairly similar to the figures provided by the Bureau of Labor Statistics. The AMA's estimates show that the average physician fee for an office visit with an established patient rose from a 1982 level of $23.49 to a 1988 level of $33.91 an average annual increase of 6.3 percent. MEDICARE COINSURANCE AND DEDUCTIBLES. Another view of rising health care costs for the elderly is provided by looking at trends in Medicare premiums, coinsurance and deductibles. With respect to coinsurance, Medicare requires beneficiaries to pay 20 percent of the "reasonable charges or costs." That means that this coinsurance rises as fast as does Medicare Part B costs, of which one indicator in recent years has been the Medicare Part B premium. In the case of hospital and skilled nursing facility coinsurance, both are tied to changes in the Medicare Part A hospital deductible. As is described in this section, the Part B premium and the Part A hospital deductible have both grown at very rapid rates. In the case of the Medicare Part B deductible, the increases since the program's inception have been modest, growing from an initial level of $50 (1966-1972) to $60 (1973-1981) to $75 currently (1982-present). In the case of the Medicare Part B premium and the Medicare Part A hospital deductible, the story is one of large increases since the program began in 1966. (See Figure 1.2) FIGURE 1.2 TRENDS IN MEDICARE ANNUAL PART B PREMIUM AND ANNUAL PART A HOSPITAL Trends in Medicare Beneficiary Costs When Medicare began in 1966, the Medicare Part A hospital deductible was $40. By 1990, that deductible had increased to $592 almost 15 times the level when Medicare began. (See Table 1.2) - The Medicare Part A hospital deductible is an amount which a beneficiary pays for each benefit period, tied to stays in a hospital for an illness. Beneficiaries may be liable for more than one hospital deductible in a given year. Further, the hospital deductible serves as the basis for also calculating hospital coinsurance (1/4 of the deductible for the 61st through 90th day in a hospital and 1/2 of the deductible for the 60 lifetime reserve days) and skilled nursing facility coinsurance (1/8th of the deductible for the 21st through 100th day). The premium figure for 1989 does not include the added flat premium for the Medicare Catastrophic Coverage Act. SOURCE: U.S. Health Care Financing Administration, 1990. While the rate of increase in the Medicare hospital deductible has slowed in the past few years, the increase in the deductible between 1989 and 1990 was higher than the increase in the Consumer Price Index (CPI-W). Even though rate of increase has slowed somewhat, this was only after massive increases in the early 1980s. Over the 1981 through 1986 period, the deductible increased by at least 12 percent each year. For both 1982 and 1986, the deductible increased by well over 20 percent. As for the Medicare Part B premium, the 1990 monthly premium of $28.60 is nearly ten times what the $3.00 monthly premium was when the Medicare program began in 1966. (See Table 1.2) Over the late 1970s and the 1980s, increases in the Medicare Part B premium have been erratic. In 1983 and 1986, the premium did not increase at all. On the other hand, the premium increased by over 10 percent each year for 1980, 1981, 1982, 1984, 1987, 1988, and 1989. The highest increase was for 1988 when the premium increased by 38.5 percent. The future of the Medicare Part B premium can be seen from the President's 1991 budget (U.S. Health Care Financing Administration, 1990). (See Table 1.3) Under current law, the increases in the premium are limited to increases in the Social Security COLA (cost-of-livingadjustment). In this case, the premium would increase at the same rate as Social Security payments. The premium would increase from a 1990 level of $28.60 to a 1995 level of $34.80. - In his 1991 budget, the President is proposing to tie future Part B premium increases to Medicare Part B cost increases a rate which is almost always substantially higher than Social Security COLAS. According to Health Care Financing Administration estimates, acceptance of the President's proposal in part or in total would result in a substantially higher rate of increase than current law over the next five years. (See Table 1.3) If the President gets the premium increase and all the rest of the Part B cuts he has proposed, the monthly Part B premium would rise to $47.10 by 1995. On the other hand, if the President gets the premium increase but does not get any of his other Part B cuts, the monthly premium would rise faster and reach a level of $50.10 by 1995. 10 TABLE 1.3 PROJECTED MEDICARE BENEFICIARY MONTHLY AND ANNUAL PART B PREMIUM FOR 1990 THROUGH 1995 UNDER THE PRESIDENT'S PROPOSAL AND UNDER CURRENT LAW. For the President's proposed premiums, "without other Part B cuts" indicates what the premium would be if the President's other expenditure cuts in the Part B program were not enacted. "With other Part B Cuts" indicates what the premium would be if the President's other proposed Part B cuts were enacted. SOURCE: U.S. Health Care Financing Administration, 1990. |