Premiums usually go up to reflect higher costs and demand for care projected for the coming year. Such increases will most certainly occur in 2009, but they will be offset when calculating the premiums by an adequate reserve in the Medicare Part B trust fund. That reserve gained $9.3 billion earlier this year after officials discovered money was inadvertently being drawn from Medicare Part B to cover hospice benefits.
Health care costs have been rising much more quickly than overall inflation over the years. That trend indicates this year's break for beneficiaries is likely a blip.
"In the future, we're going to have to go back to raising the premiums to match the increase in expenditures," said Richard Foster, chief actuary at the Centers for Medicare and Medicaid Services.
The monthly premium for Medicare Part B covers a portion of the costs for physician services, home health and the purchase of certain medical equipment, such as wheelchairs and oxygen machines. The deductible for those services will also hold steady next year at $135. That's the amount beneficiaries pay before their insurance coverage will kick in.
Officials said next year's freeze is just the fifth time since 1976 that premiums did not increase. However, about 5 percent of the nearly 44 million people in Medicare are subject to a higher premium based on their income. Congress approved higher premiums for wealthier beneficiaries as part of a bill establishing a new drug benefit. The participants affected are those individuals earning more than $85,000 and couples earning more than $170,000. The amount of those premiums will range from $134.90 to $308.30, depending upon the participant's income.
The advocacy group AARP said the premium freeze should not delay lawmakers from making changes to the health care system next year under a new president and Congress.
"The average 73-year-old in Medicare has seen his or her premium double since joining the program. Americans old and young continue to struggle with skyrocketing health care costs," said Nancy LeaMond, an executive vice president at AARP. "And the weakening economy is only making it harder for people - especially retirees on fixed incomes - to pay their health care bills."
Medicare also has a program for covering hospital and nursing home care, called Part A. The vast majority of beneficiaries don't pay a monthly charge for that coverage, but they will pay a $1,068 deductible when admitted to a hospital. That charge is an increase of $44 from current levels.
Overall, Medicare is expected to cost more than $500 billion next year.