Federal Register, Volume 74 Issue 203 (Thursday, October 22, 2009)

[Federal Register Volume 74, Number 203 (Thursday, October 22, 2009)]
[Notices]
[Pages 54571-54579]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-25370]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-8039-N]
RIN 0938-AP48

Medicare Program; Medicare Part B Monthly Actuarial Rates,
Premium Rate, and Annual Deductible Beginning January 1, 2010

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, 2010. 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 2010 are $221.00 for aged enrollees and
$270.40 for disabled enrollees. The standard monthly Part B premium
rate for 2010 is $110.50, which is equal to 50 percent of the monthly
actuarial rate for aged enrollees or roughly 25 percent of the expected
average total cost of Part B coverage for aged enrollees. (The 2009
standard premium rate was $96.40.) The Part B deductible for 2010 is
$155.00 for all Part B beneficiaries. A beneficiary who has to pay an
income-related monthly adjustment may have to pay a total monthly
premium of roughly 35, 50, 65 or 80 percent of the total cost of Part B
coverage.

DATES: Effective Date: January 1, 2010.

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. Part B costs are met
by payments from the Part B account of the Supplementary Medical
Insurance Trust Fund, which is funded by the premiums paid by all
enrollees and 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 rates, according to actuarial estimates,
will initially 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 actuarial rates are then adjusted to
include any margin necessary to maintain an adequate contingency
reserve in the Part B account of the Supplementary Medical Insurance
Trust Fund.
The Part B deductible to be paid by enrollees is also announced.
Prior to the

[[Page 54572]]

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 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 2010
Part B deductible is calculated by multiplying the 2009 deductible by
the ratio of the 2010 aged actuarial rate over the 2009 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 his or her annual income.
Specifically, if a beneficiary's ``modified adjusted gross income'' is
greater than the legislated threshold amounts (for 2010, $85,000 for a
beneficiary filing an individual income tax return, and $170,000 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 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 approximately 25 percent of the estimated total cost
to the program of Part B coverage for an aged enrollee. However,
depending on income and tax filing status, a beneficiary could 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 (DRA) (Pub. L. 109-171) modified the
transition to a 3-year period. The full reduction in the Part B premium
subsidy for beneficiaries with incomes above the applicable thresholds
is in effect for calendar years 2009 and later.
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 2010, the allocation was temporarily
extended.
A further provision affecting the calculation of the Part B premium
is

[[Page 54573]]

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 2010 are
$221.00 for enrollees age 65 and over and $270.40 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 2010 is $110.50. The Part
B annual deductible for 2010 is $155.00. Listed below are the 2010 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. (The income thresholds are indexed to the
Consumer Price Index and rounded to the nearest $1,000.)

----------------------------------------------------------------------------------------------------------------
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
----------------------------------------------------------------------------------------------------------------
Less than or equal to $85,000............... Less than or equal to $170,000 $0.00 $110.50
Greater than $85,000 and less than or equal Greater than $170,000 and less 44.20 154.70
to $107,000. than or equal to $214,000.
Greater than $107,000 and less than or equal Greater than $214,000 and less 110.50 221.00
to $160,000. than or equal to $320,000.
Greater than $160,000 and less than or equal Greater than $320,000 and less 176.80 287.30
to $214,000. than or equal to $428,000.
Greater than $214,000....................... Greater than $428,000......... 243.10 353.60
----------------------------------------------------------------------------------------------------------------

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 with their spouse at any time Income-related Total monthly
during the year, but file a separate monthly adjust- premium amount
tax return from their spouse: ment amount
------------------------------------------------------------------------
Less than or equal to $85,000....... $0.00 $110.50
Greater than $85,000 and less than 176.80 287.30
or equal to $129,000...............
Greater than $129,000............... 243.10 353.60
------------------------------------------------------------------------

[[Page 54574]]

The Part B annual deductible for 2010 is $155.00 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 2010

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 2008 and 2009.

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)
----------------------------------------------------------------------------------------------------------------
December 31, 2008............................................... $59,382 $12,490 $46,892
December 31, 2009............................................... 59,876 13,999 45,876
----------------------------------------------------------------------------------------------------------------

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: (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 2010
is determined by first establishing per-enrollee cost by type of
service from program data through 2008 and then projecting these costs
for subsequent years. The projection factors used for financing periods
from January 1, 2007 through December 31, 2010 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 2010 is $189.84. 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 monthly actuarial rate of $221.00 provides an adjustment of
$34.32 for a contingency margin and -$3.16 for interest earnings.
The size of the contingency margin for 2010 is affected by several
factors. The first and largest factor involves current law formula for
physician fees, which will result in a reduction in physician fees of
approximately 21 percent in 2010 and is projected to cause additional
reductions in subsequent years. Smaller scheduled reductions in
physician payments have been legislatively avoided in every year since
2002. In recognition of the strong possibility of substantial increases
in Part B expenditures that would result from similar legislation to
override the decreases in physician fees in 2010 or later years, it is
appropriate to maintain a significantly larger Part B contingency
reserve than would otherwise be necessary. The asset level projected
for the end of 2009 is not adequate to accommodate this contingency.
A second, much smaller factor underlying the need for an adequate
contingency reserve, is the possibility for increased Part B costs in
2010 as a result of a serious flu season.
The third factor has a large impact on the level of the contingency
reserve. As noted previously, for most Part B beneficiaries the hold-
harmless provision prevents their benefits under section 202 or 223 of
the Act from decreasing as a result of an increase in the Part B
premium. The increase in the benefits under section 202 and 223 of the
Act is nearly certain to be 0 percent for 2010 and possibly for 2011.
As a result, the increase in the Part B premium for 2010 (the $14.10
increase from the 2009 standard monthly premium of $96.40 to the 2010
standard monthly premium of $110.50) will be paid by only a small
percentage of Part B enrollees. (Approximately 27 percent of
beneficiaries are not subject to the hold-harmless provision because
they are subject to the income-related additional premium amount (5
percent), they are new enrollees during the year (3 percent), or they
do not have their Part B premiums withheld from social security benefit
payments (19 percent), including those who qualify for both Medicare
and Medicaid and have their Part B premiums paid on their behalf by
Medicaid (17 percent).) In order for Part B to be adequately funded in
2010, the 2010 contingency margin has been increased to account for
this situation. However, the result is a larger-than-usual premium paid
by or on behalf of a minority of Part B enrollees.
The traditional goal for the Part B reserve has been that assets
minus liabilities at the end of a year should

[[Page 54575]]

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 high probability that premiums and
matching general revenues in 2010 will be inadequate, due to the hold-
harmless provision, and 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 in excess of 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 actuarial rate of $221.00 per month for aged beneficiaries, as
announced in this notice for 2010, 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 2010 is $222.93. The monthly actuarial rate of $270.40
also provides an adjustment of -$3.64 for interest earnings and $51.11
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 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 large contingency margin is needed to increase assets to
an appropriate level.
The actuarial rate of $270.40 per month for disabled beneficiaries,
as announced in this notice for 2010, 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 $66,192 million by the end
of December 2010 under the assumptions used in preparing this report.
This amounts to 31 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 $42,525 million by the end of December 2010, which
amounts to 18 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 $89,783 million by the end
of December 2010, or 47 percent of the estimated total incurred
expenditures for the following year.
The above analysis indicates that the premium and general revenue
financing established for 2010, together with existing Part B account
assets would be adequate to cover estimated Part B costs for 2010 under
current law, even if actual costs prove to be somewhat greater than
expected.
5. Premium Rates and Deductible
As determined in accordance with section 1839 of the Act, listed
below are the 2010 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.

------------------------------------------------------------------------
Beneficiaries who are married and Income-related
lived with their spouse at any time monthly Total monthly
during the year, but file a separate adjustment premium amount
tax return from their spouse: amount
------------------------------------------------------------------------
Less than or equal to $85,000....... $0.00 $110.50
Greater than $85,000 and less than 176.80 287.30
or equal to $129,000...............

[[Page 54576]]

Greater than $129,000............... 243.10 353.60
------------------------------------------------------------------------

Table 2--Projection Factors\1\ 12-Month Periods Ending December 31 of 2007-2010
[In percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Physicians' services Durable Other Home Other
Calendar year ------------------------ medical Carrier carrier Outpatient health Hospital intermediary Managed
Fees\2\ Residual\3\ equipment LAB\4\ services\5\ hospital agency LAB\6\ services\7\ care
--------------------------------------------------------------------------------------------------------------------------------------------------------
Aged:
2007.......................... -1.4 3.5 2.9 9.8 4.7 8.5 18.8 3.2 8.4 3.6
2008.......................... 0.4 3.8 7.6 7.9 4.7 4.9 11.6 3.9 5.0 5.1
2009.......................... 1.7 4.0 -2.1 11.1 7.4 8.9 13.4 9.3 8.9 2.0
2010.......................... -21.7 8.1 2.9 3.7 4.4 5.1 1.4 -1.7 5.1 -1.9
Disabled:
2007.......................... -1.4 3.4 3.6 13.1 6.7 8.8 20.7 6.1 8.8 4.5
2008.......................... 0.4 4.1 7.8 12.4 9.1 6.8 9.8 5.7 6.9 4.8
2009.......................... 1.7 5.5 1.3 15.6 10.0 9.6 14.2 10.4 9.6 1.9
2010.......................... -21.7 8.1 3.2 3.6 3.6 5.1 1.8 -1.7 5.1 -2.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
\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, 2007 Through December 31, 2010
----------------------------------------------------------------------------------------------------------------
Financing periods
---------------------------------------------------------------
CY 2007 CY 2008 CY 2009 CY 2010
----------------------------------------------------------------------------------------------------------------
Covered services (at level recognized):
Physician fee schedule...................... 78.46 78.70 81.13 68.34
Durable medical equipment................... 9.65 9.99 9.53 9.75
Carrier lab \1\............................. 3.96 4.11 4.45 4.59
Other carrier services \2\.................. 19.74 19.88 20.81 21.60
Outpatient hospital......................... 29.87 30.18 32.03 33.48
Home health................................. 9.84 10.57 11.67 11.76
Hospital lab \3\............................ 2.80 2.79 2.98 2.91
Other intermediary services \4\............. 13.26 13.53 14.54 13.93
Managed care................................ 41.93 49.89 54.74 54.51
---------------------------------------------------------------
Total services.......................... 209.51 219.65 231.87 220.87
===============================================================
Cost sharing: ..............
Deductible.................................. -5.33 -5.49 -5.50 -6.32
Coinsurance................................. -30.74 -30.31 -31.42 -28.29
---------------------------------------------------------------
Total benefits.......................... 173.44 183.84 194.95 186.26
===============================================================
Administrative expenses......................... 5.68 2.95 3.41 3.58
Incurred expenditures........................... 179.12 186.79 198.36 189.84
Value of interest............................... -1.98 -3.35 -2.83 -3.16
Contingency margin for projection error and to 9.86 9.26 -2.83 34.32
amortize the surplus or deficit................
---------------------------------------------------------------
Monthly actuarial rate...................... 187.00 192.70 192.70 221.00
----------------------------------------------------------------------------------------------------------------
\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, and rehabilitation and psychiatric hospitals, etc.

[[Page 54577]]

Table 4--Derivation of Monthly Actuarial Rate for Disabled Enrollees for Financing Periods Ending December 31,
2007 Through December 31, 2010
----------------------------------------------------------------------------------------------------------------
Financing periods
---------------------------------------------------------------
CY 2007 CY 2008 CY 2009 CY 2010
----------------------------------------------------------------------------------------------------------------
Covered services (at level recognized):
Physician fee schedule...................... 78.44 79.83 84.46 71.37
Durable medical equipment................... 16.95 17.76 17.76 18.29
Carrier lab \1\............................. 5.00 5.41 6.10 6.31
Other carrier services \2\.................. 23.11 24.47 26.57 27.45
Outpatient hospital......................... 40.10 41.44 44.75 46.92
Home health................................. 8.24 8.79 9.89 10.05
Hospital lab \3\............................ 4.37 4.47 4.85 4.75
Other intermediary services \4\............. 40.76 41.29 43.26 43.48
Managed care................................ 29.87 36.50 39.83 39.49
---------------------------------------------------------------
Total services.......................... 246.85 259.96 277.47 268.11
===============================================================
Cost sharing:
Deductible.................................. -5.00 -5.11 -5.15 -5.92
Coinsurance................................. -43.83 -44.25 -46.42 -43.08
---------------------------------------------------------------
Total benefits.......................... 198.03 210.60 225.90 219.11
===============================================================
Administrative expenses......................... 3.85 3.37 3.66 3.82
Incurred expenditures........................... 201.88 213.97 229.56 222.93
Value of interest............................... -3.37 -4.32 -3.29 -3.64
Contingency margin for projection error and to -1.21 0.05 -2.07 51.11
amortize the surplus or deficit................
---------------------------------------------------------------
Monthly actuarial rate...................... 197.30 209.70 224.20 270.40
----------------------------------------------------------------------------------------------------------------
\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.

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, 2010
----------------------------------------------------------------------------------------------------------------
As of December 31, 2008 2009 2010
----------------------------------------------------------------------------------------------------------------
This projection:
Actuarial status (in millions):.......................... ............... ............... ...............
Assets................................................... 59,382 59,876 79,611
Liabilities.............................................. 12,490 13,999 13,419
--------------------------------------------------
Assets less liabilities.................................. 46,892 45,876 66,192
Ratio (in percent) \1\............................... 22.6 22.7 31.4
==================================================
Low cost projection: ............... ............... ...............
Actuarial status (in millions):.......................... ............... ............... ...............
Assets................................................... 59,382 67,931 102,532
Liabilities.............................................. 12,490 13,188 12,748
--------------------------------------------------
Assets less liabilities.................................. 46,892 54,744 89,783
Ratio (in percent) \1\............................... 23.6 29.2 47.4
==================================================
High cost projection: ............... ............... ...............
Actuarial status (in millions):.......................... ............... ............... ...............
Assets................................................... 59,382 52,148 56,681
Liabilities.............................................. 12,490 14,778 14,156
--------------------------------------------------
Assets less liabilities.................................. 46,892 37,370 42,525
Ratio (in percent)\1\................................ 21.8 17.2 18.2
----------------------------------------------------------------------------------------------------------------
\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 impacts of this notice as required by
Executive Order 12866 on Regulatory Planning and Review (September 30,
1993), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub.
L. 96-354), section 1102(b) of the Social Security Act, section 202 of
the Unfunded

[[Page 54578]]

Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C.
804(2)).
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). A regulatory impact
analysis (RIA) must be prepared for major rules with economically
significant effects ($100 million or more in any one year).
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, if a rule has a significant impact on a
substantial number of small entities. 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 $7 million to $34.5 million in any 1 year. Individuals and
States are not included in the definition of a small entity. Therefore,
the Secretary has determined that this notice will not have a
significant economic impact on a substantial number of small entities.
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. The Secretary has
determined that this notice will not have a significant impact 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) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. In 2008, that
threshold is approximately $133 million. This notice does not contain
mandates that will impose spending costs on State, local or tribal
governments in the aggregate, or by the private sector in any one year
of $133 million or more.
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 2010 are $221.00 for enrollees age 65 and over and $270.40 for
disabled enrollees under age 65. The Part B deductible for calendar
year 2010 is $155.00. The notice also announces the 2010 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 monthly adjust- Total monthly
return with income: tax return with income: ment amount premium amount
----------------------------------------------------------------------------------------------------------------
Less than or equal to $85,000............... Less than or equal to $170,000 $0.00 $110.50
Greater than $85,000 and less than or equal Greater than $170,000 and less 44.20 154.70
to $107,000. than or equal to $214,000.
Greater than $107,000 and less than or equal Greater than $214,000 and less 110.50 221.00
to $160,000. than or equal to $320,000.
Greater than $160,000 and less than or equal Greater than $320,000 and less 176.80 287.30
to $214,000. than or equal to $428,000.
Greater than $214,000....................... Greater than $428,000......... 243.10 353.60
----------------------------------------------------------------------------------------------------------------

The standard Part B premium rate of $110.50 is $14.10 higher than
the premium for 2009, so there will be about $2 billion of additional
costs in 2010 to the approximately 12 million Part B enrollees who pay
the increase in the Part B premium. Therefore, this notice is a major
rule as defined in 5 U.S.C. 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.

[[Page 54579]]

IV. Waiver of Proposed Notice

The statute requires publication of the monthly actuarial rates and
the Part B premium amounts. 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: October 14, 2009.
Charlene Frizzera,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: October 16, 2009.
Kathleen Sebelius,
Secretary.
[FR Doc. E9-25370 Filed 10-16-09; 4:15 pm]
BILLING CODE 4120-01-P