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For Medicare Part A, which pays for hospital, skilled nursing, hospice care and some home health care, the beneficiary deductible will increase to $812, up 2.5 percent from $792 in 2001. The premium for Medicare Part B, which helps pay for physician services, ambulatory care and other services, will rise to $54 per month, up 8 percent from $50 per month in 2001.

The Medicare statute requires that the deductibles and premium be updated annually in accordance with statutory formulas. Medicare law sets the Part B premium at the amount needed to cover 25 percent of estimated program costs for aged enrollees; general revenue tax dollars cover the other 75 percent of the costs. The Part A deductible applies only to those enrolled in the original fee-for-service Medicare program. Beneficiaries who choose to enroll in private Medicare+Choice plans may not be affected by the Part A increase, and may receive additional benefits with different cost-sharing arrangements.

"Seniors and disabled Americans in fee-for-service Medicare pay higher out-of-pocket expenses than many private health plans," HHS Secretary Tommy G. Thompson said. "We need to bring Medicare into the 21st century and give all seniors and disabled Americans more and better insurance options, such as those available to federal employees. The President's principles for strengthening and modernizing Medicare will move us closer to that goal."

The Part A deductible is a beneficiary's only cost for up to 60 days of Medicare-covered inpatient hospital care. However, for extended Medicare-covered hospital stays, beneficiaries must pay an additional $203 per day for days 61 through 90 and $406 per day for hospital stays beyond the 90th day in a benefit period - up from $198 per day and $396 per day, respectively. For beneficiaries in skilled nursing facilities, the daily coinsurance for days 21 through 100 will be $101.50, up from $99 in 2001.

Most of Medicare's 40 million beneficiaries choose the optional Part B coverage, which helps pay for physician services, hospital outpatient care, durable medical equipment and other services, including some home health care. Moreover, nearly 90 percent of Medicare beneficiaries have some form of third-party payer (such as Medigap, Medicaid, or Medicare+Choice) to help reduce out-of-pocket medical costs.

"For some seniors, Medicare+Choice plans offer a reasonable alternative to fee-for-service Medicare's high out-of-pocket costs, but too many seniors don't have that option," said Tom Scully, administrator of the Centers for Medicare & Medicaid Services (CMS), which runs the Medicare program. "We have worked throughout the year to do what we can to stabilize the Medicare+Choice program, and we intend to work with Congress to strengthen and modernize it for the long term."

The Part A premium, paid by only a small percentage of beneficiaries, also is increasing in 2002. For the estimated 392,000 beneficiaries who pay a premium for Medicare Part A coverage, premiums will increase by $19, to $319. This amount is paid by seniors with less than 30 quarters of Medicare-covered employment (and by certain people with disabilities who are under age 65, have lost disability benefits because of work and earnings and have less than 30 quarters of Medicare-covered employment). Seniors with 30 to 39 quarters of Medicare-covered employment (and certain people with disabilities who are under age 65, have lost disability benefits because of work and earnings, and have at least 30 quarters of Medicare-covered employment) are entitled to a reduced monthly premium, which is increasing by $10, to $175.

States have programs that pay some or all of beneficiaries' Medicare premiums and coinsurance for certain people who have Medicare and a low income. Information is available at 1-800-MEDICARE (1-800-633-4227) and, for hearing and speech impaired, at TTY/TDD: 1-877-486-2048.

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Information concerning the Social Security Cost of Living increase for 2002 was also released today and can be found at www.SSA.gov.

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