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News Release

HHS Announces Medicare Premium and Deductible Rates for 2004

The Department of Health and Human Services (HHS) today announced the Medicare premium, deductible and coinsurance amounts to be paid by Medicare beneficiaries in 2004.

For Medicare Part A, which pays for inpatient hospital, skilled nursing facility, and some home health care, the deductible paid by the beneficiary will be $876 in 2004, an increase of $36 from this year's $840 deductible. 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 $66.60, an increase of 13.5 percent or $7.90 over the $58.70 premium for 2003.

Medicare deductibles and premiums are updated annually in accordance with formulas set by law. The Part B premium is required to be the amount needed to cover 25 percent of estimated program costs for enrollees aged 65 and older. General revenue tax dollars cover the other 75 percent of the costs. The same statute prescribes the method for computing the Part A inpatient hospital deductible.

"These premium changes underscore the need to improve and modernize the Medicare program," HHS Secretary Tommy G. Thompson said. "We need a Medicare system that provides more choices for beneficiaries and more incentives for efficient, high-quality care. Choice and efficient care can help keep Medicare spending and Medicare premiums affordable as well as help us down the road to preserving Medicare for future generations."

Most Medicare beneficiaries enrolled in Part B pay the monthly premium. The Part A deductible applies only to those enrolled in the original fee-for-service Medicare program. Those who 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.

About 95 percent of Medicare's 41.7 million beneficiaries are enrolled in the optional Part B, which helps pay for physician services, hospital outpatient care, durable medical equipment and other services, including some home health care. Nearly 90 percent also have some form of supplemental coverage (such as Medigap, Medicaid, or Medicare+Choice) to help reduce out-of-pocket medical costs.

The Part A deductible is the 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 $219 per day for days 61 through 90 in 2004, and $438 per day for hospital stays beyond the 90th day in a benefit period. For 2003, per day payment for days 61 through 90 was $210, and $420 for beyond 90 days.

For beneficiaries in skilled nursing facilities, the daily co-insurance for days 21 through 100 will be $109.50 in 2004, compared to $105 in 2003.

Most Medicare beneficiaries do not pay a premium for Part A services since they have 40 quarters of Medicare-covered employment. However, 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 formula in the Medicare statute at $343 for 2004, an increase of $27 from 2003. In addition, seniors with 30 to 39 quarters of coverage, and certain disabled persons with 30 or more quarters of coverage, are entitled to pay a reduced premium of $189.

States have programs that pay some or all of beneficiaries' 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.

Information concerning the Social Security Cost of Living increase for 2004 was also released today and can be found at http://www.SSA.gov.

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Note: All HHS press releases, fact sheets and other press materials are available at http://www.hhs.gov/news.

Last Revised: October 16, 2003