FR Doc 06-7709

[Federal Register: September 18, 2006 (Volume 71, Number 180)]
[Notices]
[Page 54665-54673]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18se06-83]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-8030-N]
RIN 0938-A023

Medicare Program; Medicare Part B Monthly Actuarial Rates,
Premium Rates, and Annual Deductible for Calendar Year 2007

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Notice.

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SUMMARY: This notice announces the monthly actuarial rates for aged
(age 65 and over) and disabled (under age 65) beneficiaries enrolled in
Part B of the Medicare Supplementary Medical Insurance (SMI) program
beginning January 1, 2007. In addition, this notice announces the
standard monthly premium for aged and disabled beneficiaries, as well
as the income-related monthly adjustment amounts to be paid by
beneficiaries with modified adjusted gross income above certain
threshold amounts, as required by section 811 of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003, as
modified by the Deficit Reduction Act of 2005. It also announces the
annual deductible to be paid by all beneficiaries during 2007.
The standard monthly Part B premium is equal to 50 percent of the
monthly actuarial rate for aged enrollees or approximately 25 percent
of the expected average total cost of Part B coverage for aged
enrollees, plus any applicable income-related monthly adjustment
amount. If a beneficiary has to pay an income-related monthly
adjustment amount, they may have to pay a total monthly premium equal
to 35, 50, 65, or 80 percent of the total cost of Part B coverage, by
the end of the 3-year transition period. However, for 2007, the
beneficiary is only responsible for one-third of any applicable income-
related monthly adjustment amount.
The monthly actuarial rates for 2007 are $187.00 for aged enrollees
and $197.30 for disabled enrollees. The monthly Part B premium rates to
be paid in 2007, including the income-related monthly adjustment
amounts, are $93.50 (the standard premium), $106.00, $124.70, $143.40,
and $162.10. The specific amount payable by beneficiaries depends on
their income level and income tax filing status. (The 2006 premium rate
paid by all beneficiaries was $88.50.)
The Part B deductible for 2007 is $131.00 for all beneficiaries.

[[Page 54666]]

DATES: Effective Date: January 1, 2007.

FOR FURTHER INFORMATION CONTACT: M. Kent Clemens, (410) 786-6391.

SUPPLEMENTARY INFORMATION:

I. Background

Part B is the voluntary portion of the Medicare program that pays
all or part of the costs for physicians' services, outpatient hospital
services, certain home health services, services furnished by rural
health clinics, ambulatory surgical centers, comprehensive outpatient
rehabilitation facilities, and certain other medical and health
services not covered by Medicare Part A, Hospital Insurance. Medicare
Part B is available to individuals who are entitled to Medicare Part A,
as well as to U.S. residents who have attained age 65 and are citizens,
and aliens who were lawfully admitted for permanent residence and have
resided in the United States for 5 consecutive years. Part B requires
enrollment and payment of monthly premiums, as provided for in 42 CFR
part 407, subpart B, and part 408, respectively. The difference between
the premiums paid by all enrollees and total incurred costs is met from
the general revenues of the Federal Government.
The Secretary of Health and Human Services (the Secretary) is
required by section 1839 of the Social Security Act (the Act) to
announce the Part B monthly actuarial rates for aged and disabled
beneficiaries, as well as the monthly Part B premium. The Part B annual
deductible is included in this notice because its determination is
directly linked to the aged actuarial rate.
The monthly actuarial rates for aged and disabled enrollees are
used to determine the correct amount of general revenue financing per
beneficiary each month. These amounts, according to actuarial
estimates, will equal, respectively, one-half the expected average
monthly cost of Part B for each aged enrollee (age 65 or over) and one-
half the expected average monthly cost of Part B for each disabled
enrollee (under age 65).
The Part B deductible to be paid by enrollees is also announced.
Prior to the Medicare Prescription Drug, Improvement, and Modernization
Act of 2003 (MMA) (Pub. L. 108-173), the Part B deductible was set in
statute. After setting the 2005 deductible amount at $110.00, section
629 of the MMA (amending section 1833(b) of the Act) requires that the
Part B deductible be indexed beginning in 2006. The indexing factor to
be used each year is the annual percentage increase in the Part B
actuarial rate for enrollees age 65 and over. Specifically, the 2007
Part B deductible is calculated by multiplying the 2006 deductible by
the ratio of the 2007 aged actuarial rate over the 2006 aged actuarial
rate. The amount determined under this formula is then rounded to the
nearest dollar.
The monthly Part B premium rate to be paid by aged and disabled
enrollees is also announced. (Although the costs to the program per
disabled enrollee are different than for the aged, the statute provides
that they pay the same premium amount.) Beginning with the passage of
section 203 of the Social Security Amendments of 1972 (Pub. L. 92-603),
the premium rate, which was determined on a fiscal year basis, was
limited to the lesser of the actuarial rate for aged enrollees, or the
current monthly premium rate increased by the same percentage as the
most recent general increase in monthly Title II Social Security
benefits.
However, the passage of section 124 of the Tax Equity and Fiscal
Responsibility Act of 1982 (TEFRA) (Pub. L. 97-248) suspended this
premium determination process. Section 124 of TEFRA changed the premium
basis to 50 percent of the monthly actuarial rate for aged enrollees
(that is, 25 percent of program costs for aged enrollees). Section 606
of the Social Security Amendments of 1983 (Pub. L. 98-21), section 2302
of the Deficit Reduction Act of 1984 (DEFRA 84) (Pub. L. 98-369),
section 9313 of the Consolidated Omnibus Budget Reconciliation Act of
1985 (COBRA 85) (Pub. L. 99-272), section 4080 of the Omnibus Budget
Reconciliation Act of 1987 (OBRA 87) (Pub. L. 100-203), and section
6301 of the Omnibus Budget Reconciliation Act of 1989 (OBRA 89) (Pub.
L. 101-239) extended the provision that the premium be based on 50
percent of the monthly actuarial rate for aged enrollees (that is, 25
percent of program costs for aged enrollees). This extension expired at
the end of 1990.
The premium rates for 1991 through 1995 were legislated by section
4301 of the Omnibus Budget Reconciliation Act of 1990 (OBRA 90) (Pub.
L. 101-508). In January 1996, the premium determination basis would
have reverted to the method established by the 1972 Social Security Act
Amendments. However, section 13571 of the Omnibus Budget Reconciliation
Act of 1993 (OBRA 93) (Pub. L. 103-66) changed the premium basis to 50
percent of the monthly actuarial rate for aged enrollees (that is, 25
percent of program costs for aged enrollees) for 1996 through 1998.
Section 4571 of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-
33) permanently extended the provision that the standard premium be
based on 50 percent of the monthly actuarial rate for aged enrollees
(that is, 25 percent of program costs for aged enrollees).
The BBA included a further provision affecting the calculation of
the Part B actuarial rates and premiums for 1998 through 2003. Section
4611 of the BBA modified the home health benefit payable under Part A
for individuals enrolled in Part B. Under this section, beginning in
1998, expenditures for home health services not considered ``post-
institutional'' are payable under Part B rather than Part A. However,
section 4611(e)(1) of the BBA required that there be a transition from
1998 through 2002 for the aggregate amount of the expenditures
transferred from Part A to Part B. Section 4611(e)(2) of the BBA also
provided a specific yearly proportion for the transferred funds. The
proportions were \1/6\ for 1998, \1/3\ for 1999, \1/2\ for 2000, \2/3\
for 2001, and \5/6\ for 2002. For the purpose of determining the
correct amount of financing from general revenues of the Federal
Government, it was necessary to include only these transitional amounts
in the monthly actuarial rates for both aged and disabled enrollees,
rather than the total cost of the home health services being
transferred.
Section 4611(e)(3) of the BBA also specified, for the purpose of
determining the premium, that the monthly actuarial rate for enrollees
age 65 and over be computed as though the transition would occur for
1998 through 2003 and that \1/7\ of the cost be transferred in 1998,
\2/7\ in 1999, \3/7\ in 2000, \4/7\ in 2001, \5/7\ in 2002, and \6/7\
in 2003. Therefore, the transition period for incorporating this home
health transfer into the premium was 7 years while the transition
period for including these services in the actuarial rate was 6 years.
Section 811 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Pub. L. 108-173, also known as the Medicare
Modernization Act, or MMA), which amended section 1839 of the Act,
requires that, starting on January 1, 2007, the Part B premium a
beneficiary pays each month be based on their annual income.
Specifically, if a beneficiary's ``modified adjusted gross income'' is
greater than the legislated threshold amounts (for 2007, $80,000 for a
beneficiary filing an individual income tax return, and $160,000 for a
beneficiary filing a joint tax return) the beneficiary is responsible
for a larger portion of the estimated total cost of Part B benefit
coverage. In addition to the standard 25 percent premium, these

[[Page 54667]]

beneficiaries will now have to pay an income-related monthly adjustment
amount. The MMA made no change to the actuarial rate calculation, and
the standard premium, which will continue to be paid by beneficiaries
whose modified adjusted gross income is below the applicable
thresholds, still represents 25 percent of the estimated total cost to
the program of Part B coverage for an aged enrollee. However, once the
adjustments are fully phased in, and depending on income and tax filing
status, a beneficiary could now be responsible for 35, 50, 65, or 80
percent of the estimated total cost of Part B coverage, rather than 25
percent. The end result of the higher premium is that the Part B
premium subsidy is reduced and less general revenue financing is
required for beneficiaries with higher income because they are paying a
larger share of the total cost with their premium. That is, the premium
subsidy will continue to be approximately 75 percent for beneficiaries
with income below the applicable income thresholds, but will be reduced
for beneficiaries with income above these thresholds. The MMA specified
that there be a 5-year transition to full implementation of this
provision. However, the Deficit Reduction Act of 2005 (Pub. L. 109-171)
(DRA) modified the transition to a 3-year period.
Section 4732(c) of the BBA added section 1933(c) of the Act, which
required the Secretary to allocate money from the Part B trust fund to
the State Medicaid programs for the purpose of providing Medicare Part
B premium assistance from 1998 through 2002 for the low-income Medicaid
beneficiaries who qualify under section 1933 of the Act. This
allocation, while not a benefit expenditure, was an expenditure of the
trust fund and was included in calculating the Part B actuarial rates
through 2002. For 2003, 2004, 2005, and 2006, the expenditure was made
from the trust fund because the allocation was temporarily extended.
However, because the extension occurred after the Part B financing was
determined, the allocation was not included in the calculation of the
financing rates. For 2007, the allocation has been temporarily extended
and is included in the calculation of the financing rates.
A further provision affecting the calculation of the Part B premium
is section 1839(f) of the Act, as amended by section 211 of the
Medicare Catastrophic Coverage Act of 1988 (MCCA 88) (Pub. L. 100-360).
(The Medicare Catastrophic Coverage Repeal Act of 1989 (Pub. L. 101-
234) did not repeal the revisions to section 1839(f) made by MCCA 88.)
Section 1839(f) of the Act referred to as the ``hold-harmless''
provision, provides that if an individual is entitled to benefits under
section 202 or 223 of the Act (the Old-Age and Survivors Insurance
Benefit and the Disability Insurance Benefit, respectively) and has the
Part B premiums deducted from these benefit payments, the premium
increase will be reduced, if necessary, to avoid causing a decrease in
the individual's net monthly payment. This decrease in payment occurs
if the increase in the individual's social security benefit due to the
cost-of-living adjustment under section 215(i) of the Act is less than
the increase in the premium. Specifically, the reduction in the premium
amount applies if the individual is entitled to benefits under section
202 or 223 of the Act for November and December of a particular year
and the individual's Part B premiums for December and the following
January are deducted from the respective month's section 202 or 223
benefits. The ``hold-harmless'' provision does not apply to
beneficiaries who are required to pay an income-related monthly
adjustment amount.
A check for benefits under section 202 or 223 of the Act is
received in the month following the month for which the benefits are
due. The Part B premium that is deducted from a particular check is the
Part B payment for the month in which the check is received. Therefore,
a benefit check for November is not received until December, but has
December's Part B premium deducted from it.
Generally, if a beneficiary qualifies for hold-harmless protection,
that is, if the beneficiary was in current payment status for November
and December of the previous year, the reduced premium for the
individual for that January and for each of the succeeding 11 months
for which he or she is entitled to benefits, under section 202 or 203
of the Act, is the greater of the following:
The monthly premium for January reduced as necessary to
make the December monthly benefits, after the deduction of the Part B
premium for January, at least equal to the preceding November's monthly
benefits, after the deduction of the Part B premium for December.
The monthly premium for that individual for that December.
In determining the premium limitations under section 1839(f) of the
Act, the monthly benefits to which an individual is entitled under
section 202 or 223 of the Act do not include retroactive adjustments or
payments and deductions on account of work. Also, once the monthly
premium amount is established under section 1839(f) of the Act, it will
not be changed during the year even if there are retroactive
adjustments or payments and deductions on account of work that apply to
the individual's monthly benefits.
Individuals who have enrolled in Part B late or who have reenrolled
after the termination of a coverage period are subject to an increased
premium under section 1839(b) of the Act. The increase is a percentage
of the premium and is based on the new premium rate before any
reductions under section 1839(f) of the Act are made.

II. Provisions of This Notice

A. Notice of Medicare Part B Monthly Actuarial Rates, Monthly Premium
Rates, and Annual Deductible

The Medicare Part B monthly actuarial rates applicable for 2007 are
$187.00 for enrollees age 65 and over and $197.30 for disabled
enrollees under age 65. Section II.B. of this notice, presents the
actuarial assumptions and bases from which these rates are derived.
Listed below are the 2007 Part B monthly premium rates to be paid by
beneficiaries who file an individual tax return (including those who
are single, head of household, qualifying widow(er) with dependent
child, or married filing separately who lived apart from their spouse
for the entire taxable year), or a joint tax return.

[[Page 54668]]

Greater than $150,000 and less than or equal Greater than $300,000 and less 49.90 143.40
to $200,000. than or equal to $400,000.
Greater than $200,000......................... Greater than $400,000........... 68.60 162.10
----------------------------------------------------------------------------------------------------------------

In addition, the monthly premium rates to be paid by beneficiaries
who are married and lived with their spouse at any time during the
taxable year, but file a separate tax return from their spouse, are
listed below.

------------------------------------------------------------------------
Beneficiaries who are married and lived Income-related
with their spouse at any time during the monthly Total monthly
year, but file a separate tax return adjustment premium amount
from their spouse amount
------------------------------------------------------------------------
Less than or equal to $80,000........... $0.00 $93.50
Greater than $80,000 and less than or 49.90 143.40
equal to $120,000......................
Greater than $120,000................... 68.60 162.10
------------------------------------------------------------------------

The Part B annual deductible for 2007 is $131.00 for all
beneficiaries.

B. Statement of Actuarial Assumptions and Bases Employed in Determining
the Monthly Actuarial Rates and the Monthly Premium Rates for Part B
Beginning January 2007

1. Actuarial Status of the Part B Account in the Supplementary Medical
Insurance Trust Fund
Under the statute, the starting point for determining the standard
monthly premium is the amount that would be necessary to finance Part B
on an incurred basis. This is the amount of income that would be
sufficient to pay for services furnished during that year (including
associated administrative costs) even though payment for some of these
services will not be made until after the close of the year. The
portion of income required to cover benefits not paid until after the
close of the year is added to the trust fund and used when needed.
The premium rates are established prospectively and are, therefore,
subject to projection error. Additionally, legislation enacted after
the financing was established, but effective for the period in which
the financing is set, may affect program costs. As a result, the income
to the program may not equal incurred costs. Therefore, trust fund
assets must be maintained at a level that is adequate to cover a
moderate degree of variation between actual and projected costs, and
the amount of incurred, but unpaid, expenses. Numerous factors
determine what level of assets is appropriate to cover a moderate
degree of variation between actual and projected costs. The two most
important of these factors are: (1) The difference from prior years
between the actual performance of the program and estimates made at the
time financing was established; and (2) the expected relationship
between incurred and cash expenditures. Both factors are analyzed on an
ongoing basis, as the trends vary over time.
Table 1 summarizes the estimated actuarial status of the trust fund
as of the end of the financing period for 2005 and 2006.

Table 1.--Estimated Actuarial Status of the Part B Account in the Supplemental Medical Insurance Trust Fund as
of the End of the Financing Period
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Assets less
Financing period ending Assets Liabilities liabilities
(millions) (millions) (millions)
----------------------------------------------------------------------------------------------------------------
Dec. 31, 2005................................................... $24,008 $10,386 $13,622
Dec. 31, 2006................................................... 29,605 7,498 22,107
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2. Monthly Actuarial Rate for Enrollees Age 65 and Older
The monthly actuarial rate for enrollees age 65 and older is one-
half of the sum of monthly amounts for: (a) The projected cost of
benefits; and (b) administrative expenses for each enrollee age 65 and
older, after adjustments to this sum to allow for interest earnings on
assets in the trust fund and an adequate contingency margin. The
contingency margin is an amount appropriate to provide for a moderate
degree of variation between actual and projected costs and to amortize
any surplus or unfunded liabilities.
The monthly actuarial rate for enrollees age 65 and older for 2007
is determined by first establishing per-enrollee cost by type of
service from program data through 2005 and then projecting these costs
for subsequent years. The projection factors used for financing periods
from January 1, 2004 through December 31, 2007 are shown in Table 2.
As indicated in Table 3, the projected monthly rate required to pay
for one-half of the total of benefits and administrative costs for
enrollees age 65 and over for 2007 is $177.83. The monthly actuarial
rate of $187.00 also provides an adjustment of -$1.86 for interest
earnings and $11.03 for a contingency margin. Based on current
estimates, the assets are not sufficient to cover the amount of
incurred, but unpaid, expenses and to provide for a moderate degree of
variation between actual and projected costs. Thus, a positive
contingency margin is needed to increase assets to a more appropriate
level. This situation has arisen primarily due to faster than expected
expenditure growth, along with the enactment of the Consolidated
Appropriations Resolution

[[Page 54669]]

(Pub. L. 108-7) in February 2003, the MMA in December 2003, and the DRA
in February 2006. Each of these three legislative packages was enacted
after the establishment of the Part B premium (for 2003, 2004, and
2006, respectively). Because each Act raised Part B expenditures
subsequent to the setting of the premium, total Part B revenues from
premiums and general fund transfers have been inadequate to cover total
costs. As a consequence, the assets of the Part B account in the
Supplementary Medical Insurance trust fund were drawn on to cover the
shortfall. Therefore, the remaining level of assets is inadequate for
contingency purposes.
The contingency margin included in establishing the 2006 actuarial
rate and beneficiary premiums was intended to achieve significant
progress towards restoring the assets to an adequate level. As noted
previously, the subsequent enactment of the DRA increased Part B
expenditures and thereby limited the growth in Part B account assets,
with the result that the intended progress was not achieved. In an
effort to balance the financial integrity of the Part B account with
the increase in the Part B premium, the financing rates for 2007 are
set to increase the asset level in the Part B account to the fully
adequate level at the end of 2007 under current law (that is, in the
absence of further legislation).
3. Monthly Actuarial Rate for Disabled Enrollees
Disabled enrollees are those persons under age 65 who are enrolled
in Part B because of entitlement to social security disability benefits
for more than 24 months or because of entitlement to Medicare under the
end-stage renal disease (ESRD) program. Projected monthly costs for
disabled enrollees (other than those with ESRD) are prepared in a
fashion parallel to the projection for the aged using appropriate
actuarial assumptions (see Table 2). Costs for the ESRD program are
projected differently because of the different nature of services
offered by the program.
As shown in Table 4, the projected monthly rate required to pay for
one-half of the total of benefits and administrative costs for disabled
enrollees for 2007 is $201.12. The monthly actuarial rate of $197.30
also provides an adjustment of -$3.92 for interest earnings and $0.10
for a contingency margin. Based on current estimates, the assets
associated with the disabled Medicare beneficiaries are sufficient to
cover the amount of incurred, but unpaid, expenses and to provide for a
moderate degree of variation between actual and projected costs. Thus,
a minimal contingency margin is needed to maintain assets at an
appropriate level.
4. Sensitivity Testing
Several factors contribute to uncertainty about future trends in
medical care costs. It is appropriate to test the adequacy of the rates
using alternative assumptions. The results of those assumptions are
shown in Table 5. One set represents program cost increases that are
lower and, therefore, more optimistic than the current estimate. The
other set represents increases that are higher and, therefore, more
pessimistic than the current estimate. The values for the alternative
assumptions were determined from a statistical analysis of the
historical variation in the respective increase factors.
Table 5 indicates that, under the assumptions used in preparing
this report, the monthly actuarial rates would result in an excess of
assets over liabilities of $32,807 million by the end of December 2007.
This amounts to 17.3 percent of the estimated total incurred
expenditures for the following year. Assumptions that are somewhat more
pessimistic (and that therefore test the adequacy of the assets to
accommodate projection errors) produce a surplus of $13,579 million by
the end of December 2007, which amounts to 6.4 percent of the estimated
total incurred expenditures for the following year. Under fairly
optimistic assumptions, the monthly actuarial rates would result in a
surplus of $43,867 million by the end of December 2007, or 26.2 percent
of the estimated total incurred expenditures for the following year.
The above analysis indicates that the premium and general revenue
financing established for 2007, together with existing Part B account
assets, would be adequate to cover estimated Part B costs for 2007
under current law, even if actual costs prove to be somewhat greater
than expected.
5. Premium Rates and Deductible
As determined pursuant to section 1839 of the Act, listed below are
the 2007 Part B monthly premium rates to be paid by beneficiaries who
file an individual tax return (including those who are single, head of
household, qualifying widow(er) with dependent child, or married filing
separately who lived apart from their spouse for the entire taxable
year), or a joint tax return.

----------------------------------------------------------------------------------------------------------------
Income-related
Beneficiaries who file an individual tax Beneficiaries who file a joint monthly Total monthly
return with income tax return with income adjustment premium amount
amount
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Less than or equal to $80,000................. Less than or equal to $160,000.. $0.00 $93.50
Greater than $80,000 and less than or equal to Greater than $160,000 and less 12.50 106.00
$100,000. than or equal to $200,000.
Greater than $100,000 and less than or equal Greater than $200,000 and less 31.20 124.70
to $150,000. than or equal to $300,000.
Greater than $150,000 and less than or equal Greater than $300,000 and less 49.90 143.40
to $200,000. than or equal to $400,000.
Greater than $200,000......................... Greater than $400,000........... 68.60 162.10
----------------------------------------------------------------------------------------------------------------

[[Page 54670]]

Greater than $120,000................... 68.60 162.10
------------------------------------------------------------------------

Also, as specified by section 1833(b) of the Act, the annual
deductible for 2007 is $131.00 for all beneficiaries.

Table 2.--Projecton Factors \1\ 12-Month Period Ending December 31 of 2004-2007
[In percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Physician's services Other
---------------------- Durable Carrier carrier Outpatient Home Hospital Other Managed
Calendar year Fees Residual medical lab \4\ services hospital health lab \6\ intermediary care
\2\ \3\ equipment \5\ agency services \7\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Aged:
2004...................... 3.8 6.0 -0.4 7.7 7.7 11.1 14.6 7.4 15.5 11.4
2005...................... 2.1 3.7 1.4 7.0 3.8 8.7 10.3 6.1 14.7 9.7
2006...................... 0.2 5.8 7.4 7.8 10.7 12.5 8.0 14.0 13.2 10.1
2007...................... -7.2 7.5 3.7 5.9 12.8 10.1 8.1 4.0 -2.6 0.8
Disabled:
2004...................... 3.8 5.9 0.4 9.3 14.0 12.3 14.8 9.5 2.1 16.0
2005...................... 2.1 3.9 3.2 7.9 10.0 9.4 9.6 5.9 10.1 3.4
2006...................... 0.2 3.8 7.3 6.3 2.2 11.2 8.1 12.3 13.2 7.8
2007...................... -7.2 7.4 3.6 5.7 11.3 9.9 8.4 3.8 -3.4 3.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ All values for services other than managed care are per fee-for-service enrollee. Managed care values are per managed care enrollee.
\2\ As recognized for payment under the program.
\3\ Increase in the number of services received per enrollee and greater relative use of more expensive services.
\4\ Includes services paid under the lab fee schedule furnished in the physician's office or an independent lab.
\5\ Includes physician-administered drugs, ambulatory surgical center facility costs, ambulance services, parenteral and enteral drug costs, supplies,
etc.
\6\ Includes services paid under the lab fee schedule furnished in the outpatient department of a hospital.
\7\ Includes services furnished in dialysis facilities, rural health clinics, federally qualified health centers, rehabilitation and psychiatric
hospitals, etc.

Table 3.--Derivation of Montly Actuarial Rate for Enrollees Age 65 and
Over for Financing Periods Ending December 31, 2004 Through December 31,
2007
------------------------------------------------------------------------
Financing periods
-------------------------------------------
CY 2004 CY 2005 CY 2006 CY 2007
------------------------------------------------------------------------
Covered services (at level
recognized):
Physician fee schedule.. $76.19 $79.78 $81.55 $79.18
Durable medical 9.65 9.67 10.02 10.12
equipment..............
Carrier lab \1\......... 3.44 3.64 3.79 3.91
Other carrier services 18.96 19.46 20.77 22.81
\2\....................
Outpatient hospital..... 26.60 28.58 31.03 33.26
Home health............. 6.66 7.26 7.56 7.96
Hospital lab \3\........ 2.69 2.83 3.11 3.15
Other intermediary 10.98 12.45 13.59 12.88
services \4\...........
Managed care............ 22.39 26.16 34.15 38.32
-------------------------------------------
Total services...... 177.56 189.82 205.57 211.59
Cost-sharing:
Deductible.............. -4.07 -4.47 -5.05 -5.33
Coinsurance............. -30.83 -31.97 -32.68 -32.32
-------------------------------------------
Total benefits...... 142.65 153.38 167.85 173.93
Administrative expenses..... 3.06 3.39 3.48 3.90
-------------------------------------------
Incurred expenditures... 145.72 156.77 171.33 177.83
Value of interest........... -1.63 -1.28 -1.30 -1.86
Contingency margin for -10.88 0.91 6.87 11.03
projection error and to
amortize the surplus or
deficit....................
===========================================
Monthly actuarial rate.. 133.20 156.40 176.90 187.00
------------------------------------------------------------------------
\1\ Includes services paid under the lab fee schedule furnished in the
physician's office or an independent lab.
\2\ Includes physician-administered drugs, ambulatory surgical center
facility costs, ambulance services, parenteral and enteral drug costs,
supplies, etc.
\3\ Includes services paid under the lab fee schedule furnished in the
outpatient department of a hospital.
\4\ Includes services furnished in dialysis facilities, rural health
clinics, federally qualified health centers, rehabilitation and
psychiatric hospitals, etc.

[[Page 54671]]

Table 4.--Derivation of Monthly Actuarial Rate for Disabled Enrollees
Financing Periods Ending December 31, 2004 through December 31, 2007
------------------------------------------------------------------------
Financing periods
-------------------------------------------
CY 2004 CY 2005 CY 2006 CY 2007
------------------------------------------------------------------------
Covered services (at level
recognized):
Physician fee schedule.. $77.90 $82.21 $84.21 $82.95
Durable medical 16.41 16.90 17.87 18.29
equipment..............
Carrier lab \1\......... 4.17 4.47 4.69 4.90
Other carrier services 22.66 24.87 25.26 27.81
\2\....................
Outpatient hospital..... 35.79 38.74 42.57 46.22
Home health............. 5.40 5.88 6.25 6.70
Hospital lab \3\........ 4.10 4.30 4.76 4.88
Other intermediary 37.40 39.75 43.99 41.65
services \4\...........
Managed care............ 11.09 12.56 16.38 19.05
-------------------------------------------
Total services...... 214.92 229.69 245.98 252.44
Cost-sharing:
Deductible.............. -3.79 -4.15 -4.71 -4.98
Coinsurance............. -44.22 -46.39 -48.23 -50.13
-------------------------------------------
Total benefits...... 166.91 179.14 193.03 197.34
Administrative expenses..... \5\ 9.16 3.83 3.76 3.78
-------------------------------------------
Incurred expenditures... 176.07 182.98 196.79 201.12
Value of interest....... -1.37 -2.35 -2.86 -3.92
Contingency margin for 0.80 11.18 9.77 0.10
projection error and to
amortize the surplus or
deficit....................
===========================================
Monthly actuarial rate.. 175.50 191.80 203.70 197.30
------------------------------------------------------------------------
\1\ Includes services paid under the lab fee schedule furnished in the
physician's office or an independent lab.
\2\ Includes physician-administered drugs, ambulatory surgical center
facility costs, ambulance services, parenteral and enteral drug costs,
supplies, etc.
\3\ Includes services paid under the lab fee schedule furnished in the
outpatient department of a hospital.
\4\ Includes services furnished in dialysis facilities, rural health
clinics, federally qualified health centers, rehabilitation and
psychiatric hospitals, etc.
\5\ Includes payment of estimated contingent liability payable to States
(to reimburse them for payments they have made on behalf of
beneficiaries) for probable unasserted claims that resulted from
processing errors where incorrect Medicare eligibility determinations
were made.

Table 5.--Actuarial Status of the Part B Account in the SMI Trust Fund
Under Three Sets of Assumptions for Financing Periods Through December
31, 2007
------------------------------------------------------------------------
As of December 31 2005 2006 2007
------------------------------------------------------------------------
This projection:
Actuarial status (in millions):
Assets...................... $24,008 $29,605 $39,921
Liabilities................. 10,386 7,498 7,114
-----------------------------------
Assets less liabilities. 13,622 22,107 32,807
Ratio (in percent) \1\...... 8.1 12.5 17.3
Low cost projection:
Actuarial status (in millions):
Assets...................... 24,008 29,605 50,192
Liabilities................. 10,386 6,684 6,325
-----------------------------------
Assets less liabilities. 13,622 22,921 43,867
Ratio (in percent) \1\...... 8.5 14.2 26.2
High cost projection:
Actuarial status (in millions):
Assets...................... 24,008 29,605 21,464
Liabilities................. 10,386 8,270 7,885
-----------------------------------
Assets less liabilities. 13,622 21,336 13,579
Ratio (in percent) \1\...... 7.7 11.1 6.4
------------------------------------------------------------------------
\1\ Ratio of assets less liabilities at the end of the year to the total
incurred expenditures during the following year, expressed as a
percent.

III. Regulatory Impact Analysis

We have examined the impact of this notice under the Executive
Order 12866 (September 1993, Regulatory Planning and Review) and the
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354).
Executive Order 12866 directs agencies to assess all costs and benefits
of available regulatory alternatives and, if regulation is necessary,
to select regulatory approaches that maximize net benefits (including
potential economic, environmental, public health and safety

[[Page 54672]]

effects, distributive impacts, and equity).
The RFA requires agencies to analyze options for regulatory relief
of small businesses. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and small governmental
jurisdictions. Most hospitals and most other providers and suppliers
are small entities, either by nonprofit status or by having revenues of
$6 million to $29 million in any 1-year.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area and has fewer than 100 beds. We have determined that
this notice will not have a significant effect on a substantial number
of small entities or on the operations of a substantial number of small
rural hospitals. Therefore, we are not preparing analyses for either
the RFA or section 1102(b) of the Act.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated costs and benefits before
issuing any proposed or final rule that contains mandates that may
result in the expenditure in any one year by State, local, and tribal
governments, or by the private sector, of $100 million in 1995 dollars.
This notice contains no mandates for expenditures by State, local, or
tribal governments or the private sector. Accordingly, it does not
trigger the threshold set under UMRA.
Executive Order 13132 establishes certain requirements that an
agency must meet when it publishes a proposed rule (and subsequent
final rule) that imposes substantial direct compliance costs on State
and local governments, preempts State law, or otherwise has Federalism
implications. We have determined that this notice does not
significantly affect the rights, roles, and responsibilities of States.
This notice announces that the monthly actuarial rates applicable
for 2007 are $187.00 for enrollees age 65 and over and $197.30 for
disabled enrollees under age 65. It also announces the 2007 monthly
Part B premium rates to be paid by beneficiaries who file an individual
tax return (including those who are single, head of household,
qualifying widow(er) with a dependent child, or married filing
separately who lived apart from their spouse for the entire taxable
year), or a joint tax return.

The Part B deductible for calendar year 2007 is $131.00. The
standard Part B premium rate of $93.50 is 5.6 percent higher than the
$88.50 premium rate for 2006. We estimate that this increase will cost
approximately 41 million Part B enrollees about $2.5 billion for 2007.
The monthly impact on the beneficiaries who are required to pay a
higher premium for 2007 because their incomes exceed specified
thresholds is $12.50, $31.20, $49.90, or $68.60, which is in addition
to the standard monthly premium. Therefore, this notice is a major rule
as defined in Title 5, United States Code, section 804(2) and is an
economically significant rule under Executive Order 12866.
In accordance with the provisions of Executive Order 12866, this
notice was reviewed by the Office of Management and Budget.

IV. Waiver of Proposed Notice and Comment

The Medicare statute requires the publication of the monthly
actuarial rates and the Part B premium amounts in September. We
ordinarily use general notices, rather than notice and comment
rulemaking procedures, to make such announcements. In doing so, we note
that, under the Administrative Procedure Act, interpretive rules,
general statements of policy, and rules of agency organization,
procedure, or practice are excepted from the requirements of notice and
comment rulemaking.
We considered publishing a proposed notice to provide a period for
public comment. However, we may waive that procedure if we find, for
good cause, that prior notice and comment are impracticable,
unnecessary, or contrary to the public interest. We find that the
procedure for notice and comment is unnecessary because the formula
used to calculate the Part B premium and the income-related monthly
adjustment amounts are statutorily directed and we can exercise no
discretion in applying

[[Page 54673]]

those formulas. Moreover, the statute establishes the time period for
which the premium rates will apply, and delaying publication of the
Part B premium rate such that it would not be published before that
time would be contrary to the public interest. Therefore, we find good
cause to waive publication of a proposed notice and solicitation of
public comments.

(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

Dated: September 11, 2006.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.

Approved: September 12, 2006.
Michael O. Leavitt,
Secretary.
[FR Doc. 06-7709 Filed 9-12-06; 4:00 pm]

BILLING CODE 4120-01-P