The monthly premium paid by beneficiaries enrolled in Medicare Part B, which covers physician services, outpatient hospital services, certain home health services, durable medical equipment and other items, will be $78.20, an increase of $11.60 over the $66.60 premium in 2004.
Medicare deductibles and premiums are updated annually in accordance with formulas set by law. By law, the federal government picks up about 75 percent of the cost of Part B benefits and the Part B premium covers the remaining 25 percent. About three-fourths of the 2005 increase is due to additional costs for Part B, and almost one-fourth for building reserves.
For Medicare Part A, which pays for inpatient hospital, skilled nursing facility, and some home health care, the deductible paid by the beneficiary when admitted as a hospital inpatient will be $912 in 2005, an increase of $36 from this year's $876 deductible. The Part A deductible is the beneficiary's only cost for up to 60 days of Medicare-covered inpatient hospital care in a benefit period. Beneficiaries must pay an additional $228 per day for days 61 through 90 in 2005, and $456 per day for hospital stays beyond the 90th day in a benefit period. For 2004, per day payment for days 61 through 90 was $219, and $438 for beyond 90 days.
For beneficiaries in skilled nursing facilities, the daily co-insurance for days 21 through 100 in a benefit period will be $114 in 2005, compared to $109.50 in 2004. Those who enroll in Medicare Advantage plans may not be affected by the Part A increase, and may receive additional benefits with different cost-sharing arrangements. All of these Part A payment changes are determined by a statutory formula.
About 99 percent of Medicare beneficiaries do not pay a premium for Part A services since they have at least 40 quarters of Medicare-covered employment. However, other seniors and certain persons under age 65 with disabilities who have fewer than 30 quarters of coverage may obtain Part A coverage by paying a monthly premium set according to a statutory formula. This premium will be $375 for 2005, an increase of $32 from 2004. In addition, seniors with 30 to 39 quarters of coverage, and certain disabled persons with 30 or more quarters of coverage, pay a reduced premium of $206.
Section 629 of the Medicare Modernization Act of 2003 requires raising the Part B deductible in 2005 and indexing it thereafter. In 2005, the Part B deductible will be $110. Beginning January 1, 2006, the deductible will be indexed to the increase in the average cost of Part B services for aged beneficiaries.