On Thursday, officials from the Health and Human Services department announced the premiums and deductibles that Medicare beneficiaries will pay in 2012. There were two main messages from those officials: that beneficiaries are paying less because utilization was down last year, and that the Affordable Care Act has had a role in bringing the costs down.

“The Affordable Care Act is helping to keep Medicare strong and affordable,” HHS Secretary Kathleen Sebelius said in a statement. “People with Medicare are seeing higher quality benefits, better health care choices, and lower costs. Health reform is also strengthening the Medicare Hospital Insurance Trust Fund and cracking down on Medicare fraud.”

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“Thanks in part to the Affordable Care Act, people with Medicare are going to have more money in their pockets next year,” said Dr. Donald Berwick, administrator of Centers for Medicare and Medicaid Services, in the same statement. “With new tools provided by the Affordable Care Act, we are improving how we pay providers, helping patients get the care they need, and spending our health care dollars more wisely.”

These were a lot of bold statements that didn’t really seem to be backed up by any of the fact sheets put out by the agencies or in a briefing with reporters. Dr. Berwick said on the call that Medicare recipients had used less services in 2011 (the basis for 2012 premiums), but never gave a good explanation for why seniors had used less health services.

Even if a reporter had wanted to probe the point, he or she first had to hack through the thicket of numbers in the HHS press releases. The conference call itself was incredibly brief, leaving very little leeway to get at the root of the complicated issues that drive Medicare premiums and deductibles.

Officially, according to CMS, the hospital premium (Part A) will rise only $1 per month in 2012; the hospital deductible will rise $24 to $1,156.  Those coinsurances are shouldered by only about 1% of Medicare enrollees, though. Most have more than 40 quarters of pay in the system, and thus don’t pay Part A premiums.

The numbers on premiums for physician services were more confusing. According to CMS, the standard Part B monthly premium will be $99.90 in 2012, a $15.50 decrease from this year’s $115.40.  The majority of beneficiaries, however, for various reasons, paid only $96.40 per month in 2011. Thus, they’ll see a $3.50 increase.

But wait. The Part B premium, though, is based on annual income, so it’s hard to really give an average figure.

Part B premiums are calculated to cover one-fourth the cost of physician services, plus a contingency margin that is essentially equivalent to an insurer’s reserve.

This has nothing to do with health reform; it’s been a statutory requirement since, well, for a long time. And the contingency margin is always dependent on what happens with the Sustainable Growth Rate formula.

10/28/11