The Centers for Medicare and Medicaid Services (“CMS”) have announced the 2007 Medicare deductibles and premiums for Parts A and B. The monthly Medicare Part B premium will increase $5.00 from $88.50 to $93.50 and for the first time the premium amounts will be higher for Medicare beneficiaries with over $80,000 in taxable income (single taxpayer) or $160,000 for those filing jointly. Part B covers physician’s and related medical services and supplies, such as diagnostic testing.

CMS explains that

The single most important factor driving the 5.6 percent Part B premium increase is the growth in traditional fee-for-service Part B spending per capita, as opposed to spending growth in Medicare Advantage. The phase-out of “budget neutrality” adjustments in Medicare Advantage payments helps account for the limited Medicare Advantage payment increase. The largest contributors to the 2007 premium increase by type of service are outpatient hospital services, physician-administered drugs, and ambulatory surgical center (ASC) services. Spending for outpatient hospital prospective payment services is growing rapidly and is projected to increase by 11.6 percent per capita in 2007. This is mainly due to an expected 7.9 percent increase in the volume and intensity of these services. In addition to the higher premium costs caused by this growth, it also results in a projected 6.5 percent increase in per capita beneficiary coinsurance payments (beneficiary coinsurance for hospital outpatient services can be as high as 40 percent). However, the 2007 premium increase is held down by a provision in current law that, if unchanged, will require a reduction in fees paid by Medicare to physicians of about 5 percent. Congress has acted to prevent such physician fee reductions from occurring in each of the last four years. Even with the fee reduction, however, the volume and intensity of physicians’ services is projected to increase by 4.9 percent in 2007, resulting in projected continuing pressure toward rising costs. As CMS has said repeatedly, the rapid growth in utilization of services and the wide variation across providers and geographic areas in the use of these services shows that Medicare needs to move away from a system that pays simply for more services, regardless of the quality of those services or their impact on beneficiary health. Medicare payments should provide better financial support to doctors and other health professionals in their efforts to achieve better health outcomes for Medicare beneficiaries at a lower cost. CMS is working closely with medical professionals and Congress to increase the effectiveness of how Medicare compensates physicians and other health care providers. CMS is also conducting demonstrations and pilot programs that pay providers more for better quality, better patient satisfaction, and lower overall health care costs

Of course, the medical community is fighting to restore the fee reduction that helps to control the Psrt B premium.The Medicare Part B deductible will increase from $124 to $131, the same percentage as the premium increase.Finally CMS explains that

Medicare Part A pays for inpatient hospital, skilled nursing facility, hospice, and certain home health care. The $992 deductible, paid by the beneficiary when admitted as a hospital inpatient, is an increase of $40 from $952 in 2006. 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 $248 per day for days 61 through 90 in 2007, and $496 per day for hospital stays beyond the 90th day for lifetime reserve days. This compares with $238 and $476 in 2006. The daily coinsurance for the 21st through 100th day in a skilled nursing facility will be $124 in 2007, up from $119 in 2006.