[Federal Register Volume 75, Number 216 (Tuesday, November 9, 2010)]
[Notices]
[Pages 68790-68798]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-28248]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-8042-N]
RIN 0938-AP81


Medicare Program; Medicare Part B Monthly Actuarial Rates, 
Premium Rate, and Annual Deductible Beginning January 1, 2011

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, 2011. 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 2011 are $230.70 for aged enrollees and 
$266.30 for disabled enrollees. The standard monthly Part B premium 
rate for 2011 is $115.40, 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 
2010 standard premium rate was $110.50.) The Part B deductible for 2011 
is $162.00 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.

DATES: Effective Date: January 1, 2011.

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 described 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 by 
payments from the Supplementary Medical Insurance Fund.
    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 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 2011 
Part B deductible is calculated by multiplying the 2010 deductible by 
the ratio of the 2011 aged actuarial rate over the 2010 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

[[Page 68791]]

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. 9-272), 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 2011, $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 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, depending 
on income and tax filing status, a beneficiary can 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 continues 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 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

[[Page 68792]]

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, 
the reduced premium for the individual for that January and for each of 
the succeeding 11 months is the greater of the following--
    <bullet> 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
    <bullet> 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 2011 are 
$230.70 for enrollees age 65 and over and $266.30 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 2011 is $115.40. The Part 
B annual deductible for 2011 is $162.00. Listed below are the 2011 Part 
B monthly premium rates to be paid by beneficiaries who file an 
individual tax return (including those who are single, head of 
household, qualifying widow(er) with dependent child, or married filing 
separately who lived apart from their spouse for the entire taxable 
year), or a joint tax return.

----------------------------------------------------------------------------------------------------------------
                                                                                  Income-related
   Beneficiaries who file an individual tax      Beneficiaries who file a joint       monthly      Total monthly
             return with  income:                    tax return with income:        adjustment    premium amount
                                                                                      amount
----------------------------------------------------------------------------------------------------------------
Less than or equal to $85,000.................  Less than or equal to $170,000..           $0.00         $115.40
Greater than $85,000 and less than or equal to  Greater than $170,000 and less             46.10          161.50
 $107,000.                                       than or equal to $214,000.
Greater than $107,000 and less than or equal    Greater than $214,000 and less            115.30          230.70
 to $160,000.                                    than or equal to $320,000.
Greater than $160,000 and less than or equal    Greater than $320,000 and less            184.50          299.90
 to $214,000.                                    than or equal to $428,000.
Greater than $214,000.........................  Greater than $428,000...........          253.70          369.10
----------------------------------------------------------------------------------------------------------------

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

------------------------------------------------------------------------
 Beneficiaries who are married and lived  Income-related
with their spouse at any time during the      monthly      Total monthly
  year, but file a separate tax return      adjustment    premium amount
           from their spouse:                 amount
------------------------------------------------------------------------
Less than or equal to $85,000...........           $0.00         $115.40
Greater than $85,000 and less than or             184.50          299.90
 equal to $129,000......................
Greater than $129,000...................          253.70          369.10
------------------------------------------------------------------------

    The Part B annual deductible for 2011 is $162.00 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 2011

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,

[[Page 68793]]

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 2009 and 2010.

 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, 2009...............................................         $75,545         $12,581         $62,964
December 31, 2010...............................................          62,065          14,902          47,163
----------------------------------------------------------------------------------------------------------------

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 2011 
is determined by first establishing per-enrollee cost by type of 
service from program data through 2009 and then projecting these costs 
for subsequent years. The projection factors used for financing periods 
from January 1, 2008 through December 31, 2011 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 2011 is $191.24. 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 $230.70 provides an adjustment of 
$41.22 for a contingency margin and -$1.76 for interest earnings.
    The size of the contingency margin for 2011 is affected by several 
factors. The first, and largest, factor involves the current law 
formula for physician fees, which will result in a reduction in 
physician fees of 23 percent in December 2010 and is projected to 
result in a reduction of about 6.5 percent in January 2011. For each 
year from 2003 through November 2010, Congress has acted to prevent 
physician fee reductions from occurring. 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 and 2011, 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 2010 is not adequate to 
accommodate this contingency.
    The second factor also 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 was 0 percent in 2010, and could be 0 percent for 2012. 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) was paid by only a small 
percentage of Part B enrollees. Similarly, the increase in the Part B 
premium for 2011 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 2011, the 2011 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.
    Two other, smaller factors affect the contingency margin for 2011. 
Starting in 2011, manufacturers and importers of brand-name 
prescription drugs will pay a fee that is allocated to the Part B 
account of the SMI trust. For 2011, the total of these brand-name drug 
fees will be $2.5 billion. The contingency margin has been reduced to 
account for this additional revenue.
    Another small factor impacting the contingency margin comes from 
the requirement that certain payment incentives, to encourage the 
development and use of health information technology (HIT) by Medicare 
physicians, are to be excluded from the premium determination. HIT 
bonuses or penalties will be directly offset through transfers with the 
general fund of the Treasury. The monthly actuarial rate includes an 
adjustment of -$1.05 for HIT bonus payments in 2011.
    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 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

[[Page 68794]]

together with variations between actual and estimated cost levels.
    The actuarial rate of $230.70 per month for aged beneficiaries, as 
announced in this notice for 2011, 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 2011 is $228.22. The monthly actuarial rate of $266.30 
also provides an adjustment of -$2.39 for interest earnings and $40.47 
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 $266.30 per month for disabled beneficiaries, 
as announced in this notice for 2011, 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 $64,247 million by the end 
of December 2011 under the assumptions used in preparing this report. 
This amounts to 28.5 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 $52,472 million by the end of December 2011, which 
amounts to 21.0 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 $73,097 million by 
the end of December 2011, or 35.8 percent of the estimated total 
incurred expenditures for the following year.
    The above analysis indicates that the premium and general revenue 
financing established for 2011, together with existing Part B account 
assets would be adequate to cover estimated Part B costs for 2011 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 2011 Part B monthly premium rates to be paid by 
beneficiaries who file an individual tax return (including those who 
are single, head of household, qualifying widow(er) with dependent 
child, or married filing separately who lived apart from their spouse 
for the entire taxable year), or a joint tax return.

----------------------------------------------------------------------------------------------------------------
                                                                               Income-related
  Beneficiaries who file an individual tax    Beneficiaries who file a joint       monthly        Total monthly
             return with income:                  tax return with income:        adjustment      premium amount
                                                                                   amount
----------------------------------------------------------------------------------------------------------------
Less than or equal to $85,000...............  Less than or equal to $170,000             $0.00           $115.40
Greater than $85,000 and less than or equal   Greater than $170,000 and less             46.10            161.50
 to $107,000.                                  than or equal to $214,000.
Greater than $107,000 and less than or equal  Greater than $214,000 and less            115.30            230.70
 to $160,000.                                  than or equal to $320,000.
Greater than $160,000 and less than or equal  Greater than $320,000 and less            184.50            299.90
 to $214,000.                                  than or equal to $428,000.
Greater than $214,000.......................  Greater than $428,000.........            253.70            369.10
----------------------------------------------------------------------------------------------------------------

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

------------------------------------------------------------------------
  Beneficiaries who are married and    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           $115.40
Greater than $85,000 and less than              184.50            299.90
 or equal to $129,000...............
Greater than $129,000...............            253.70            369.10
------------------------------------------------------------------------


[[Page 68795]]


                                     Table 2--Projection Factors\1\ 12-Month Periods Ending December 31 of 2008-2011
                                                                      [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:
    2008......................         0.4         3.3         7.1         7.3         4.2         6.4        12.3         4.3          6.1          5.4
    2009......................         1.6         2.4        -9.0         9.7         4.6        10.1        10.4        10.1         10.2          0.3
    2010......................         1.2         5.0         5.8         6.0         3.8         6.6         1.6         1.9          5.8         -1.8
    2011......................       -26.0         9.9         2.9        -0.1         4.5         6.2        -0.8        -2.4         -3.1          0.7
Disabled:
    2008......................         0.4         3.2         7.4        11.6         8.8         7.7        14.3         5.9          6.9          5.9
    2009......................         1.6         6.7        -2.4        23.5         8.2        12.3        10.5        13.0         18.3          0.5
    2010......................         1.2         5.2         5.6         7.9         3.9         6.8         3.2         1.7          9.1         -1.5
    2011......................       -26.0         9.9         3.2        -0.2         4.3         6.1        -0.7        -2.4         -0.3          0.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
\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, 2008 Through December 31, 2011
----------------------------------------------------------------------------------------------------------------
                                                                         Financing periods
                                                 ---------------------------------------------------------------
                                                      CY 2008         CY 2009         CY 2010         CY 2011
----------------------------------------------------------------------------------------------------------------
Covered services (at level recognized):
    Physician fee schedule......................           78.35           79.29           83.37           67.42
    Durable medical equipment...................            9.95            8.80            9.21            9.43
    Carrier lab \1\.............................            4.09            4.36            4.58            4.55
    Other carrier services \2\..................           19.81           20.15           20.67           21.48
    Outpatient hospital.........................           30.70           32.86           34.63           36.60
    Home health.................................           10.64           11.42           11.48           11.33
    Hospital lab \3\............................            2.78            2.98            3.00            2.91
    Other intermediary services \4\.............           13.30           14.25           14.91           14.37
    Managed care................................           49.90           54.19           54.77           55.87
                                                 ---------------------------------------------------------------
        Total services..........................          219.53          228.30          236.60          223.97
Cost sharing:
    Deductible..................................           -5.50           -5.50           -6.32           -6.61
    Coinsurance.................................          -30.21          -30.42          -31.22          -27.82
HIT payment incentives..........................            0.00            0.00            0.00           -1.05
                                                 ---------------------------------------------------------------
        Total benefits..........................          183.82          192.37          199.06          188.49
Administrative expenses.........................            2.93            2.98            3.44            2.75
                                                 ---------------------------------------------------------------
Incurred expenditures...........................          186.75          195.35          202.50          191.24
Value of interest...............................           -3.34           -2.80           -2.47           -1.76
Contingency margin for projection error and to              9.29            0.14           20.97           41.22
 amortize the surplus or deficit................
                                                 ---------------------------------------------------------------
        Monthly actuarial rate..................          192.70          192.70          221.00          230.70
----------------------------------------------------------------------------------------------------------------
\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, and rehabilitation and psychiatric hospitals, etc.


 Table 4--Derivation of Monthly Actuarial Rate for Disabled Enrollees for Financing Periods Ending December 31,
                                         2008 Through December 31, 2011
----------------------------------------------------------------------------------------------------------------
                                                                         Financing Periods
                                                 ---------------------------------------------------------------
                                                      CY 2008         CY 2009         CY 2010         CY 2011
----------------------------------------------------------------------------------------------------------------
Covered services (at level recognized):
    Physician fee schedule......................           78.89           83.25           88.30           72.86
    Durable medical equipment...................           17.59           16.67           17.53           18.38
    Carrier lab \1\.............................            5.35            6.24            6.68            6.76
    Other carrier services \2\..................           24.29           25.64           26.52           28.06

[[Page 68796]]

 
    Outpatient hospital.........................           41.73           45.70           48.63           52.43
    Home health.................................            9.10            9.81           10.09           10.21
    Hospital lab \3\............................            4.42            4.85            4.91            4.86
    Other intermediary services \4\.............           40.34           42.60           44.35           45.12
    Managed care................................           36.46           40.55           40.23           37.80
                                                 ---------------------------------------------------------------
        Total services..........................          258.18          275.31          287.23          276.46
Cost sharing:
    Deductible..................................           -5.14           -5.15           -5.92           -6.18
    Coinsurance.................................          -43.88          -45.90          -47.26          -44.23
HIT payment incentives                                      0.00            0.00            0.00           -1.11
                                                 ---------------------------------------------------------------
        Total benefits..........................          209.15          224.26          234.05          224.94
Administrative expenses.........................            3.33            3.47            3.70            3.28
                                                 ---------------------------------------------------------------
Incurred expenditures...........................          212.49          227.73          237.75          228.22
Value of interest...............................           -4.26           -3.33           -2.91           -2.39
Contingency margin for projection error and to              1.47           -0.19           35.56           40.47
 amortize the surplus or deficit................
                                                 ---------------------------------------------------------------
        Monthly actuarial rate..................          209.70          224.20          224.20          266.30
----------------------------------------------------------------------------------------------------------------
\1\ Includes services paid under the lab fee schedule furnished in the physician's office or an independent lab.
\2\ Includes physician-administered drugs, ambulatory surgical center facility costs, ambulance services,
  parenteral and enteral drug costs, supplies, etc.
\3\ Includes services paid under the lab fee schedule furnished in the outpatient department of a hospital.
\4\ Includes services furnished in dialysis facilities, rural health clinics, Federally qualified health
  centers, rehabilitation and psychiatric hospitals, etc.


    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, 2011
----------------------------------------------------------------------------------------------------------------
                       As of December 31,                              2009            2010            2011
----------------------------------------------------------------------------------------------------------------
This projection:
Actuarial status (in millions):
    Assets......................................................          75,545          62,065          78,995
    Liabilities.................................................          12,581          14,902          14,721
                                                                 -----------------------------------------------
        Assets less liabilities.................................          62,964          47,163          64,274
    Ratio (in percent) \1\......................................            28.7            22.1            28.5
Low cost projection:
Actuarial status (in millions):
    Assets......................................................          75,545          62,065          87,001
    Liabilities.................................................          12,581          14,379          13,904
                                                                 -----------------------------------------------
        Assets less liabilities.................................          62,964          47,686          73,097
    Ratio (in percent) \1\......................................            29.4            23.9            35.8
High cost projection:
Actuarial status (in millions):
    Assets......................................................          75,545          62,065          68,305
    Liabilities.................................................          12,581          15,436          15,833
                                                                 -----------------------------------------------
        Assets less liabilities.................................          62,964          46,628          52,472
    Ratio (in percent) \1\......................................            28.0            20.3            21.0
----------------------------------------------------------------------------------------------------------------
\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 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).

[[Page 68797]]

    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 $6.7 million to $34.5 million in any 1 year. Individuals 
and States are not included in the definition of a small entity. This 
notice will not have a significant impact on a substantial number of 
small businesses or other small entities. 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. We have determined that 
this notice will not have a significant effect on a substantial number 
of small entities or on the operations of a substantial number of small 
rural hospitals. Therefore, we are not preparing analyses for either 
the RFA or section 1102(b) of the Act.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 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 2010, that 
threshold is approximately $135 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 2011 are $230.70 for enrollees age 65 and over and $266.30 for 
disabled enrollees under age 65. It also announces the 2011 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      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         $115.40
Greater than $85,000 and less than or equal to  Greater than $170,000 and less             46.10          161.50
 $107,000.                                       than or equal to $214,000.
Greater than $107,000 and less than or equal    Greater than $214,000 and less            115.30          230.70
 to $160,000.                                    than or equal to $320,000.
Greater than $160,000 and less than or equal    Greater than $320,000 and less            184.50          299.90
 to $214,000.                                    than or equal to $428,000.
Greater than $214,000.........................  Greater than $428,000...........          253.70          369.10
----------------------------------------------------------------------------------------------------------------

    In addition, the monthly premium rates to be paid by beneficiaries 
who are married and lived with their spouse at any time during the 
taxable year, but file a separate tax return from their spouse, are 
also announced and 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 $85,000...........           $0.00         $115.40
Greater than $85,000 and less than or             184.50          299.90
 equal to $129,000......................
Greater than $129,000...................          253.70          369.10
------------------------------------------------------------------------

    The standard Part B premium rate of $115.40 is $4.90 higher than 
the premium for 2010, so there will be about $700 million of additional 
costs in 2011 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.

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

[[Page 68798]]

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. 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. 
Moreover, we find that notice and comment are unnecessary because the 
formulas used to calculate the Part B premiums are statutorily 
directed. 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 27, 2010.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: October 29, 2010.
Kathleen Sebelius,
Secretary.
[FR Doc. 2010-28248 Filed 11-4-10; 2:15 pm]
BILLING CODE 4120-01-P