FR Doc 07-4910

[Federal Register: October 5, 2007 (Volume 72, Number 193)]
[Notices]
[Page 57039-57047]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05oc07-54]

-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-8033-N]
RIN 0938-AO68

Medicare Program; Medicare Part B Monthly Actuarial Rates,
Premium Rate, and Annual Deductible Beginning January 1, 2008

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

ACTION: Notice.

-----------------------------------------------------------------------

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, 2008. In addition, this notice announces the
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.
The monthly actuarial rates for 2008 are $192.70 for aged enrollees and
$209.70 for disabled enrollees. The standard monthly Part B premium
rate for 2008 is $96.40, which 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. (The
2007 standard premium rate was $93.50.) The Part B deductible for 2008
is $135.00 for all Part B beneficiaries. If a beneficiary has to pay an
income-related monthly adjustment, they may have to pay a total monthly
premium of about 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
2008, the beneficiary is only responsible for 67 percent of any
applicable income-related monthly adjustment amount. (For 2007, the
beneficiary was responsible for 33 percent of the applicable amount.)

DATES: Effective Date: January 1, 2008.

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 the Department 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 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

[[Page 57040]]

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 inflation 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 2008
Part B deductible is calculated by multiplying the 2007 deductible by
the ratio of the 2008 aged actuarial rate over the 2007 aged actuarial
rate. The amount determined under this formula is then rounded to the
nearest $1.
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 rate for 1991 through 1995 was legislated by section
1839(e)(1)(B) of the Act, as added 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 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 2008, $82,000 for a
beneficiary filing an individual income tax return, and $164,000 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
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, section 5111 of 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 through 2007, the expenditure was made from the
trust fund because the allocation was temporarily extended. However,
because the extension occurred after the financing was determined, the
allocation was not included in the calculation of the financing rates.
A further provision affecting the calculation of the Part B premium
is

[[Page 57041]]

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; or
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 re-
enrolled 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 the 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 2008 are
$192.70 for enrollees age 65 and over and $209.70 for disabled
enrollees under age 65. Section II.B. of this notice below, presents
the actuarial assumptions and bases from which these rates are derived.
The Part B standard monthly premium rate for 2008 is $96.40. The Part B
annual deductible for 2008 is $135.00. Listed below are the 2008 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 tax monthly Total monthly
return with income: return with income: adjustment premium amount
amount
----------------------------------------------------------------------------------------------------------------
Less than or equal to $82,000.............. Less than or equal to $164,000..... $0.00 $96.40
Greater than $82,000 and less than or equal Greater than $164,000 and less than 25.80 122.20
to $102,000. or equal to $204,000.
Greater than $102,000 and less than or Greater than $204,000 and less than 64.50 160.90
equal to $153,000. or equal to $306,000.
Greater than $153,000 and less than or Greater than $306,000 and less than 103.30 199.70
equal to $205,000. or equal to $410,000.
Greater than $205,000...................... Greater than $410,000.............. 142.00 238.40
----------------------------------------------------------------------------------------------------------------

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 $82,000........... $0.00 $96.40
Greater than $82,000 and less than or 103.30 199.70
equal to $123,000......................
Greater than $123,000................... 142.00 238.40
------------------------------------------------------------------------

[[Page 57042]]

The Part B annual deductible for 2008 is $135.00 for all
beneficiaries.

B. Statement of Actuarial Assumptions and Bases Employed in Determining
the Monthly Actuarial Rates and the Monthly Premium Rate for Part B
Beginning January 2008

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 an
appropriate 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 variation
between actual and projected costs. The three 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; (2) the likelihood and potential magnitude of expenditure
changes resulting from enactment of legislation affecting Part B costs
in a year subsequent to the establishment of financing for that year,
and (3) the expected relationship between incurred and cash
expenditures. These factors are analyzed on an ongoing basis, as the
trends can vary over time.
Table 1 summarizes the estimated actuarial status of the trust fund
as of the end of the financing period for 2006 and 2007.

Table 1.--Estimated Actuarial Status of the Part B Account in the Supplementary Medical Insurance Trust Fund as
of the End of the Financing Period
----------------------------------------------------------------------------------------------------------------
Assets less
Financing period ending Assets Liabilities liabilities
(millions) (millions) (millions)
----------------------------------------------------------------------------------------------------------------
Dec. 31, 2006................................................... $32,325 $10,929 $21,396
Dec. 31, 2007................................................... 39,469 9,470 29,999
----------------------------------------------------------------------------------------------------------------

2. Monthly Actuarial Rate for Enrollees Age 65 and Older
The monthly actuarial rate for enrollees age65 and older is one-
half of the sum of monthly amounts for: (1) The projected cost of
benefits; and (2) 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 possible
variation between actual and projected costs and to amortize any
surplus assets or unfunded liabilities.
The monthly actuarial rate for enrollees age 65 and older for 2008
is determined by first establishing per-enrollee cost by type of
service from program data through 2006 and then projecting these costs
for subsequent years. The projection factors used for financing periods
from January 1, 2005 through December 31, 2008 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 2008 is $183.25. The monthly actuarial
rate of $192.70 also provides an adjustment of -$2.40 for interest
earnings and $11.85 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 significant degree
of variation between actual and projected costs. Thus, a positive
contingency margin is needed to increase assets to a more appropriate
level.
The size of the contingency margin for 2008 is affected by several
factors. First, a significant portion of the assets of the Part B
account in the SMI trust fund was drawn down in 2003 and 2004 as a
result of faster-than-expected expenditure growth, along with the
enactment of the Consolidated Appropriations Resolution (Pub. L. 108-7)
in February 2003 and the Medicare Modernization Act in December 2003.
Each of these two legislative packages was enacted after the
establishment of the Part B premium (for 2003 and 2004, 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 were 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. Due to continuing
faster-than-expected growth in Part B expenditures, only a minimal
increase in assets occurred in 2005, despite a large increase in the
2005 Part B premium that was intended to partially replenish the assets
in the Part B account. In 2006 and 2007, the Part B expenditures were
again higher in each year than expected when the Part B financing was
determined as a result of the enactment of legislation after the
financing was set (specifically, the Deficit Reduction Act of 2005 and
the Tax Relief and Health Care Act of 2006). Therefore, while the Part
B assets increased in 2006 and 2007, the asset level remains lower than
intended for contingency purposes.
In addition, the likelihood and magnitude of possible differences
between actual and estimated Part B expenditures have increased
significantly. Under current law, the cumulative actual level of
physician (and physician-related) Part B expenditures is substantially
in excess of the ``allowable'' level provided by the Sustainable Growth
Rate (SGR) provisions. As a result, current law mandates a reduction in
Medicare payment rates for physicians of approximately 10 percent for
2008 and another 5 percent per year for roughly another 10 years. As
noted above, Congress has acted repeatedly in recent years to prevent
such fee reductions from occurring, and is very likely to continue to
do so for 2008 and subsequent years. Because of this continuing
possibility, and the significant increase in Part B expenditures that
results when Congress

[[Page 57043]]

overrides the statutory provisions that otherwise mandate decreases in
physician fees, it is appropriate to maintain a somewhat larger Part B
contingency reserve than would otherwise be necessary.
The traditional goal for the Part B reserve has been that assets
minus liabilities at the end of a year should represent between 15 and
20 percent of the following year's total incurred expenditures. Within
this range, 17 percent has been the normal target. In view of the
strong likelihood of actual expenditures exceeding estimated levels,
due to the enactment of legislation after the financing has been set
for a given year, a contingency reserve ratio of about 20 percent of
the following year's expenditures would better ensure that the assets
of the Part B account can adequately cover the cost of incurred-but-
not-reported benefits together with variations between actual and
estimated cost levels.
The final factor affecting the contingency margin in the 2008 aged
actuarial rate is the correction of an accounting error. Beginning in
May 2005, expenditures for certain Part A hospice benefits were
inadvertently drawn from the Part B account of the SMI trust fund,
rather than from the Hospital Insurance (HI) trust fund. Correction of
this error will result in adjustments to the HI and SMI trust funds to
account for the misallocated hospice expenditures during fiscal years
2005 through 2007. As a result of this error, Part B outlays had been
overstated in 2005 through 2007; Part B benefit costs estimated for
2008 are lower than previously projected, and Part B assets available
for contingency purposes will be greater. Both factors serve to reduce
the level of assets needed to serve as an adequate contingency reserve.
In addition, the lower expected amount of Part B outlays in 2008
reduces the premium increase that, together with matching general fund
transfers, is needed to finance Part B benefits and administrative
expenses. This error has no impact on the 2008 Part A premium.
The actuarial rate of $192.70 per month for aged beneficiaries, as
announced in this notice for 2008, reflects the combined net effect of
the factors described above and the projection assumptions listed in
Table 2.
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 2008 is $213.50. The monthly actuarial rate of $209.70
also provides an adjustment of -$3.83 for interest earnings and $0.03
for a contingency margin, reflecting the same factors described above
for the aged actuarial rate. 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
significant degree of variation between actual and projected costs.
Thus, a near-zero contingency margin is sufficient to maintain assets
at an appropriate level.
The actuarial rate of $209.70 per month for disabled beneficiaries,
as announced in this notice for 2008, reflects the combined net effect
of the factors described above for aged beneficiaries and the
projection assumptions listed in table 2.
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 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.
As indicated in Table 5, the monthly actuarial rates would result
in an excess of assets over liabilities of $41,627 million by the end
of December 2008--(1) Under the assumptions used in preparing this
report; and (2) with the Part B account of the SMI trust fund fully
reimbursed for the cost of Part A hospice benefits inadvertently drawn
from the Part B account. This amounts to 20.8 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 $27,532 million by the end of December 2008, which
amounts to 12.4 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 $53,492 million by
the end of December 2008, or 29.6 percent of the estimated total
incurred expenditures for the following year.
The above analysis indicates that the premium and general revenue
financing established for 2008, together with existing Part B account
assets (including the restoration of assets inadvertently drawn from
the Part B account to pay the cost of Part A hospice benefits), would
be adequate to cover estimated Part B costs for 2008 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 2008 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 57044]]

Greater than $153,000 and less than or Greater than $306,000 and less than 103.30 199.70
equal to $205,000. or equal to $410,000.
Greater than $205,000...................... Greater than $410,000.............. 142.00 238.40
----------------------------------------------------------------------------------------------------------------

Table 2.--Projection Factors\1\ 12-Month Periods Ending December 31 of 2005-2008
[In percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Physicians' services Other
------------------------ Durable Carrier carrier Outpatient Home Hospital Other Managed
Calendar year Residual medical lab \4\ services hospital health Lab \6\ intermediary care
Fees \2\ \3\ equipment \5\ agency services \7\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Aged:
2005...................... 2.1 3.4 1.6 6.6 3.4 8.4 16.2 3.5 13.6 9.8
2006...................... 0.2 4.7 6.8 7.9 5.8 4.6 6.3 4.8 5.2 13.5
2007...................... -1.4 4.7 4.4 7.9 9.7 2.8 8.9 3.1 -3.7 3.5
2008...................... 10.1 7.7 4.6 5.5 12.7 10.0 7.4 3.4 -2.6 6.4
Disabled:
2005...................... 2.1 2.8 1.9 7.9 8.5 6.2 17.3 5.5 11.6 2.3
2006...................... 0.2 0.9 5.1 7.1 -5.7 2.0 5.9 3.5 7.4 8.9
2007...................... -1.4 2.6 3.7 12.3 1.6 3.3 8.5 -1.0 -18.4 3.4
2008...................... -10.1 7.7 4.9 5.4 11.6 9.9 8.1 3.4 -3.2 7.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
\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 Monthly Actuarial Rate for Enrollees Age 65 and Over for Financing Periods Ending
December 31, 2005 Through December 31, 2008
----------------------------------------------------------------------------------------------------------------
Financing periods
---------------------------------------------------------------
CY 2005 CY 2006 CY 2007 CY 2008
----------------------------------------------------------------------------------------------------------------
Covered services (at level recognized):
Physician fee schedule...................... 79.51 79.96 79.06 75.12
Durable medical equipment................... 9.68 9.92 9.92 10.19
Carrier lab \1\............................. 3.63 3.75 3.88 4.02
Other carrier services \2\.................. 19.38 19.68 20.67 22.86
Outpatient hospital......................... 28.23 28.31 27.88 30.11
Home health................................. 7.64 7.79 8.13 8.57
Hospital lab \3\............................ 2.79 2.80 2.77 2.81
Other intermediary services \4\............. 12.32 12.44 11.47 10.97
Miscellaneous intermediary \5\.............. 2.25 5.63 4.42 1.34
Managed care................................ 26.12 36.06 43.86 49.56
---------------------------------------------------------------
Total services.......................... 191.56 206.34 212.07 215.55
Cost-sharing:
Deductible.................................. -4.48 -5.05 -5.33 -5.50
Coinsurance................................. -31.81 -31.18 -29.97 -29.51
---------------------------------------------------------------
Total benefits.......................... 155.27 170.12 176.76 180.54
Administrative expenses......................... 3.39 3.37 3.03 2.71
---------------------------------------------------------------
Incurred expenditures........................... 158.66 173.48 179.79 183.25
Value of interest............................... -1.27 -1.52 -1.70 -2.40

[[Page 57045]]

Contingency margin for projection error and to -0.98 4.94 8.91 11.85
amortize the surplus or deficit................
===============================================================
Monthly actuarial rate...................... 156.40 176.90 187.00 192.70
----------------------------------------------------------------------------------------------------------------
\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\ Represents intermediary Part B expenditures reported on a cash basis that have not yet been reconciled with
corresponding incurred benefit costs.

Table 4.--Derivation of Monthly Actuarial Rate for Disabled Enrollees Financing Periods Ending December 31, 2005
Through December 31, 2008
----------------------------------------------------------------------------------------------------------------
Financing periods
---------------------------------------------------------------
CY 2005 CY 2006 CY 2007 CY 2008
----------------------------------------------------------------------------------------------------------------
Covered services (at level recognized):
Physician fee schedule...................... 81.05 80.70 80.26 77.02
Durable medical equipment................... 16.73 17.25 17.58 18.29
Carrier lab \1\............................. 4.43 4.70 5.14 5.37
Other carrier services \2\.................. 24.32 22.92 23.11 25.59
Outpatient hospital......................... 37.51 37.98 38.53 42.01
Home health................................. 6.25 6.50 6.91 7.42
Hospital lab \3\............................ 4.28 4.33 4.26 4.37
Other intermediary services \4\............. 39.06 39.48 37.29 35.49
Miscellaneous intermediary \5\.............. 2.59 6.22 5.00 1.57
Managed care................................ 12.45 16.80 20.69 23.74
---------------------------------------------------------------
Total services.......................... 228.68 236.88 238.77 240.87
Cost-sharing:
Deductible.................................. -4.17 -4.71 -4.98 -5.14
Coinsurance................................. -45.63 -44.37 -33.98 -25.33
---------------------------------------------------------------
Total benefits.......................... 178.87 187.80 199.80 210.39
Administrative expenses......................... 3.78 3.56 3.24 3.11
---------------------------------------------------------------
Incurred expenditures....................... 182.66 191.36 203.04 213.50
Value of interest............................... -2.33 -3.53 -3.74 -3.83
Contingency margin for projection error and to 11.47 15.87 -2.00 0.03
amortize the surplus or deficit................
===============================================================
Monthly actuarial rate...................... $191.80 $203.70 $197.30 $209.70
----------------------------------------------------------------------------------------------------------------
\1\ Includes services paid under the lab fee schedule furnished in the physician's office or an independent lab.

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, 2008
----------------------------------------------------------------------------------------------------------------
As of December 31
-----------------------------------------------
2006 2007 2008
----------------------------------------------------------------------------------------------------------------
This projection:
Actuarial status (in millions):
Assets.................................................. 32,325 39,469 51,547
Liabilities............................................. 10,929 9,470 9,920
-----------------------------------------------
Assets less liabilities............................. 21,396 29,999 41,627
Ratio (in percent) \1\...................................... 11.9 16.0 20.8

[[Page 57046]]

Low cost projection:
Actuarial status (in millions):
Assets.................................................. 32,325 39,488 62,911
Liabilities............................................. 10,929 8,687 9,419
-----------------------------------------------
Assets less liabilities............................. 21,396 30,761 53,492
Ratio (in percent) \1\...................................... 12.5 17.7 29.6
High cost projection:
Actuarial status (in millions):
Assets.................................................. 32,325 39,448 38,098
Liabilities............................................. 10,929 10,267 10,566
-----------------------------------------------
Assets less liabilities............................. 21,396 29,181 27,532
Ratio (in percent) \1\...................................... 11.4 14.5 12.4
----------------------------------------------------------------------------------------------------------------
\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 as required by 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 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 also
requires that agencies assess anticipated costs and benefits before
issuing any rule that may result in expenditure in any 1 year by State,
local, or tribal governments, in the aggregate, or by the private
sector, of $110 million. This notice has no consequential effect on
State, local, or tribal governments. We believe the private sector
costs of this notice fall below this threshold as well.
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 2008 are $192.70 for enrollees age 65 and over and $209.70 for
disabled enrollees under age 65. It also announces the 2008 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.

----------------------------------------------------------------------------------------------------------------
Income-related
Beneficiaries who file an individual tax Beneficiaries who file a joint tax monthly Total monthly
return with income: return with income: adjustment premium amount
amount
----------------------------------------------------------------------------------------------------------------
Less than or equal to $82,000.............. Less than or equal to $164,000..... $0.00 $96.40
Greater than $82,000 and less than or equal Greater than $164,000 and less than 25.80 122.20
to $102,000. or equal to $204,000.
Greater than $102,000 and less than or Greater than $204,000 and less than 64.50 160.90
equal to $153,000. or equal to $306,000.
Greater than $153,000 and less than or Greater than $306,000 and less than 103.30 199.70
equal to $205,000. or equal to $410,000.
Greater than $205,000. Greater than $410,000. 142.00 238.40
----------------------------------------------------------------------------------------------------------------

[[Page 57047]]

The Part B deductible for calendar year 2008 is $135.00. The
standard Part B premium rate of $96.40 is 3.1 percent higher than the
$93.50 premium rate for 2007. We estimate that this increase will cost
approximately 41.5 million Part B enrollees about $1.4 billion for
2008. The monthly impact on the beneficiaries who are required to pay a
higher premium for 2008 because their incomes exceed specified
thresholds is $25.80, $64.50, $103.30, or $142.00, 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

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 formulas
used to calculate the Part B premiums are statutorily directed, and we
can exercise no discretion in applying 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 26, 2007.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: September 26, 2007.
Michael O. Leavitt,
Secretary.
[FR Doc. 07-4910 Filed 10-1-07; 11:18 am]

BILLING CODE 4120-01-P