[Federal Register Volume 70, Number 184 (Friday, September 23, 2005)]
[Notices]
[Pages 55897-55903]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-18837]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-8027-N]
RIN 0938-AO02


Medicare Program; Medicare Part B Monthly Actuarial Rates, 
Premium Rate, and Annual Deductible for Calendar Year 2006

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, 2006. In addition, this notice announces the 
monthly premium for aged and disabled beneficiaries and the annual 
deductible to be paid during 2006. The monthly actuarial rates for 2006 
are $176.90 for aged enrollees and $203.70 for disabled enrollees. The 
monthly Part B premium rate for 2006 is $88.50 which is equal to 50 
percent of the monthly actuarial rate for aged enrollees or about 25 
percent of Part B costs for aged enrollees. (The 2005 premium rate was 
$78.20.) The Part B deductible for 2006 is $124.00.

EFFECTIVE DATE: January 1, 2006.

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

[[Page 55898]]

to U.S. residents who have attained age 65 and are citizens, and aliens 
who were lawfully admitted for permanent residence and have resided in 
the United States for 5 consecutive years. Part B requires enrollment 
and payment of monthly premiums, as provided for in 42 CFR part 407, 
subpart B, and part 408, respectively. The difference between the 
premiums paid by all enrollees and total incurred costs is met from the 
general revenues of the Federal Government.
    The Secretary of the Department of Health and Human Services (the 
Secretary) is required by section 1839 of the Social Security Act (the 
Act) to announce the Part B monthly actuarial rates for aged and 
disabled beneficiaries as well as the monthly Part B premium. The Part 
B annual deductible is included because its determination is directly 
linked to the aged actuarial rate.
    The monthly actuarial rates for aged and disabled enrollees are 
used to determine the correct amount of general revenue financing per 
beneficiary each month. These amounts, according to actuarial 
estimates, will equal, respectively, one-half the expected average 
monthly cost of Part B for each aged enrollee (age 65 or over) and one-
half the expected average monthly cost of Part B for each disabled 
enrollee (under age 65).
    The Part B deductible to be paid by enrollees is also announced. 
Prior to the Medicare Prescription Drug, Improvement, and Modernization 
Act of 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 2006 
Part B deductible is calculated by multiplying the 2005 deductible by 
the ratio of the 2006 aged actuarial rate over the 2005 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 4732(c) of the BBA added section 1933(c) of the Act, which 
required the Secretary to allocate money from the Part B trust fund to 
the State Medicaid programs for the purpose of providing Medicare Part 
B premium assistance from 1998 through 2002 for the low-income Medicaid 
beneficiaries who qualify under section 1933 of the Act. This 
allocation, while not a benefit expenditure, was an expenditure of the 
trust fund and was included in calculating the Part B actuarial rates 
through 2002. For 2003, 2004, and 2005, 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

[[Page 55899]]

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.
    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--
    <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 reenrolled 
after the termination of a coverage period are subject to an increased 
premium under section 1839(b) of the Act. The increase is a percentage 
of the premium and is based on the new premium rate before any 
reductions under section 1839(f) of the Act are made.

II. Provisions of the Notice

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

    The Medicare Part B monthly actuarial rates applicable for 2006 are 
$176.90 for enrollees age 65 and over, and $203.70 for disabled 
enrollees under age 65. Subsection B of this notice below, presents the 
actuarial assumptions and bases from which these rates are derived. The 
Part B monthly premium rate for 2006 is $88.50. The Part B annual 
deductible for 2006 is $124.00.

B. Statement of Actuarial Assumptions and Bases Employed in Determining 
the Monthly Actuarial Rates and the Monthly Premium Rate for Part B 
Beginning January 2006

1. Actuarial Status of the Part B Account in the Supplementary Medical 
Insurance Trust Fund
    Under the statute, the starting point for determining the 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 rates are established prospectively and are, therefore, subject 
to projection error. Additionally, legislation enacted after the 
financing was established, but effective for the period in which the 
financing is set, may affect program costs. As a result, the income to 
the program may not equal incurred costs. Therefore, trust fund assets 
must be maintained at a level that is adequate to cover a moderate 
degree of variation between actual and projected costs, and the amount 
of incurred, but unpaid, expenses. Numerous factors determine what 
level of assets is appropriate to cover a moderate degree of variation 
between actual and projected costs. The two most important of these 
factors are: (1) The difference from prior years between the actual 
performance of the program and estimates made at the time financing was 
established; and (2) the expected relationship between incurred and 
cash expenditures. Both factors are analyzed on an ongoing basis, as 
the trends vary over time.
    Table 1 summarizes the estimated actuarial status of the trust fund 
as of the end of the financing period for 2004 and 2005.

 Table 1.--Estimated Actuarial Status of the Part B Account in the Supplementary Medical Insurance Trust Fund as
                                       of the End of the Financing Period
----------------------------------------------------------------------------------------------------------------
                                                                                                    Assets less
                     Financing period ending                          Assets        Liabilities     liabilities
                                                                    (millions)      (millions)      (millions)
----------------------------------------------------------------------------------------------------------------
Dec. 31, 2004...................................................         $19,430          $9,920          $9,510
Dec. 31, 2005...................................................         f21,349           9,398          11,951
----------------------------------------------------------------------------------------------------------------

2. Monthly Actuarial Rate for Enrollees Age 65 and Older
    The monthly actuarial rate for enrollees age 65 and older is one-
half of the sum of monthly amounts for: (a) the projected cost of 
benefits; and (b) administrative expenses for each enrollee age 65 and 
older, after adjustments to this sum to allow for interest earnings on 
assets in the trust fund and an adequate contingency margin. The 
contingency margin is an amount appropriate to provide for a moderate 
degree of variation between actual and projected costs and to amortize 
any surplus or unfunded liabilities.

[[Page 55900]]

    The monthly actuarial rate for enrollees age 65 and older for 2006 
is determined by first establishing per-enrollee cost by type of 
service from program data through 2004 and then projecting these costs 
for subsequent years. The projection factors used for financing periods 
from January 1, 2003 through December 31, 2006 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 2006 is $166.33. The monthly actuarial 
rate of $176.90 also provides an adjustment of -$1.63 for interest 
earnings and $12.20 for a contingency margin. Based on current 
estimates, the assets are not sufficient to cover the amount of 
incurred, but unpaid, expenses and to provide for a moderate degree of 
variation between actual and projected costs. Thus, a positive 
contingency margin is needed to increase assets to a more appropriate 
level. This situation has arisen primarily due to faster than expected 
expenditure growth, along with the enactment of the Consolidated 
Appropriations Resolution (Pub. L. 108-7) in February 2003 and the 
Medicare Modernization Act in December 2003. Each of these two 
legislative packages was enacted after the establishment of the Part B 
premium (for 2003 and 2004, respectively). Because each Act raised Part 
B expenditures subsequent to the setting of the premium, total Part B 
revenues from premiums and general fund transfers have been inadequate 
to cover total costs. As a consequence, the assets of the Part B 
account in the Supplementary Medical Insurance trust fund were drawn on 
to cover the shortfall. Due to faster than expected growth in Part B 
expenditures, only a minimal increase in assets occurred in 2005, 
despite a large increase in the 2005 Part B premium, in an attempt to 
partially replenish the assets in the Part B account. Therefore, the 
remaining level of assets is inadequate for contingency purposes.
    The contingency margin included in establishing the 2006 actuarial 
rate and beneficiary premiums takes another step towards restoring the 
assets to an adequate level. In an effort to balance the financial 
integrity of the Part B account with the increase in the Part B 
premium, the financing rates for 2006 are set to increase the asset 
level in the Part B account towards the fully adequate level, with the 
expectation that future financing rates will need to include 
contingency margins to fully restore the assets.
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 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 2006 is $191.42. The monthly actuarial rate of $203.70 
also provides an adjustment of -$2.91 for interest earnings and $15.19 
for a contingency margin. 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 moderate degree of variation between actual and projected costs. 
Thus, a positive contingency margin is needed to increase assets to a 
more appropriate level.
4. Sensitivity Testing
    Several factors contribute to uncertainty about future trends in 
medical care costs. It is appropriate to test the adequacy of the rates 
using alternative assumptions. The results of those assumptions are 
shown in Table 5. One set represents increases that are lower and, 
therefore, more optimistic than the current estimate. The other set 
represents increases that are higher and, therefore, more pessimistic 
than the current estimate. The values for the alternative assumptions 
were determined from a statistical analysis of the historical variation 
in the respective increase factors.
    Table 5 indicates that, under the assumptions used in preparing 
this report, the monthly actuarial rates would result in an excess of 
assets over liabilities of $25,557 million by the end of December 2006. 
This amounts to 15.0 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 $12,409 million by 
the end of December 2006, which amounts to 6.5 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 $38,276 million by the end of December 2006, or 25.2 percent 
of the estimated total incurred expenditures for the following year.
5. Premium Rate and Deductible
    As determined by section 1839(a)(3) of the Act, the monthly premium 
rate for 2006, for both aged and disabled enrollees, is $88.50. In 
addition, as specified by section 1833(b) of the Act, the annual 
deductible for 2006 is $124.00.

                                    Table 2.--Projection Factors \1\ 12-Month Periods Ending December 31 of 2003-2006
                                                                      [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
    2003..............................        1.4        4.4       14.2        6.8       16.2         5.3        2.9        7.7          3.0         3.3
    2004..............................        3.8        6.2        0.6        7.8        7.8        10.1       13.0        7.3         15.2        12.3
    2005..............................        1.5        5.6       -2.3        7.2        4.7         9.2       10.4        9.0         13.1         8.7
    2006..............................       -4.5        6.4       -0.3        4.5       10.4         7.9        7.8        4.9          1.7        11.2
Disabled
    2003..............................        1.4        5.3       16.2        6.3       24.8         5.6       22.3        6.9         -2.5        -1.9
    2004..............................        3.8        6.5        1.5       10.1       14.8        12.7       11.8        9.6          0.5         4.8
    2005..............................        1.5        6.0       -1.8        8.7       16.7         8.8       10.8       10.8         13.9         6.0

[[Page 55901]]

 
    2006..............................       -4.5        6.4       -0.3        4.3        9.0         7.8        7.9        4.9         -1.6       11.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
\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, 2003 Through December 31, 2006
----------------------------------------------------------------------------------------------------------------
                                                                               Financing periods
                                                             ---------------------------------------------------
                                                                CY 2003      CY 2004      CY 2005      CY 2006
----------------------------------------------------------------------------------------------------------------
Covered services (at level recognized):
    Physician fee schedule..................................        69.32        76.40        80.84        78.53
    Durable medical equipment...............................         9.73         9.78         9.44         8.99
    Carrier lab \1\.........................................         3.20         3.45         3.65         3.65
    Other carrier services \2\..............................        17.62        18.99        19.64        20.72
    Outpatient hospital.....................................        23.97        26.39        28.45        29.33
    Home health.............................................         5.90         6.66         7.27         7.49
    Hospital lab \3\........................................         2.51         2.70         2.90         2.91
    Other intermediary services \4\.........................         9.44        10.88        12.15        11.81
    Managed care............................................        20.06        22.55        26.24        36.00
                                                             --------------
        Total services......................................   \5\ 161.76   \5\ 177.80   \5\ 190.58       199.43
Cost-sharing:
    Deductible..............................................        -4.07        -4.40        -4.48        -5.04
    Coinsurance.............................................       -28.64       -30.87       -32.64       -30.73
                                                             --------------
        Total benefits......................................       129.05       142.53       153.47       163.66
Administrative expenses.....................................         2.44         3.01         4.21         2.67
                                                             --------------
Incurred expenditures.......................................       131.49       145.55       157.67       166.33
Value of interest...........................................        -2.30        -1.63        -1.27        -1.63
Contingency margin for projection error and to amortize the        -10.49       -10.71         0.00        12.20
 surplus or deficit.........................................
Monthly actuarial rate......................................       118.70       133.20       156.40      176.90
----------------------------------------------------------------------------------------------------------------
 \1\ Includes services paid under the lab fee schedule furnished in the physician's office or an independent
  lab.
 \2\ Includes physician-administered drugs, ambulatory surgical center facility costs, ambulance services,
  parenteral and enteral drug costs, supplies, etc.
 \3\ Includes services paid under the lab fee schedule furnished in the outpatient department of a hospital.
 \4\ Includes services furnished in dialysis facilities, rural health clinics, Federally qualified health
  centers, rehabilitation and psychiatric hospitals, etc.
 \5\ Includes transfers to Medicaid. Section 1933(c)(2) of the Act, as added by section 4732(c) of the BBA,
  allocates an amount to be transferred from the Part B account in the SMI trust fund to the state Medicaid
  programs. This transfer is for the purpose of paying the Part B premiums for certain low-income beneficiaries.
  It is not a benefit expenditure but is used in determining the Part B actuarial rates since it is an
  expenditure of the trust fund.


Table 4.--Derivation of Monthly Actuarial Rate for Disabled Enrollees Financing Periods Ending December 31, 2003
                                            Through December 31, 2006
----------------------------------------------------------------------------------------------------------------
                                                                               Financing periods
                                                             ---------------------------------------------------
                                                                CY 2003      CY 2004      CY 2005      CY 2006
----------------------------------------------------------------------------------------------------------------
Covered services (at level recognized):
    Physician fee schedule..................................        70.61        78.23        83.54        83.06
    Durable medical equipment...............................        16.38        16.64        16.26        15.86
    Carrier lab \1\.........................................         3.80         4.21         4.59         4.69
    Other carrier services \2\..............................        20.01        22.85        26.38        28.17
    Outpatient hospital.....................................        31.90        35.90        38.67        40.80
    Home health.............................................         4.72         5.26         5.78         6.11
    Hospital lab \3\........................................         3.74         4.11         4.51         4.62
    Other intermediary services \4\.........................        35.02        37.46        39.70        39.83

[[Page 55902]]

 
    Managed care............................................         9.77        10.57        12.26        17.10
                                                             --------------
        Total services......................................   \5\ 195.94   \5\ 215.24   \5\ 231.68       240.14
Cost-sharing:
    Deductible..............................................        -3.78        -3.79        -4.17        -4.70
    Coinsurance.............................................       -40.38       -43.66       -47.02       -47.09
                                                             --------------
        Total benefits......................................       151.78       167.79       180.49       188.36
Administrative expenses.....................................         2.88     \6\ 7.83         4.66         3.07
Incurred expenditures.......................................       154.66       175.62       185.15       191.42
Value of interest...........................................        -1.22        -1.37        -1.75        -2.91
Contingency margin for projection error and to amortize the        -12.43         1.25         8.40        15.19
 surplus or deficit.........................................
Monthly actuarial rate......................................       141.00       175.50       191.80      203.70
----------------------------------------------------------------------------------------------------------------
\1\ Includes services paid under the lab fee schedule furnished in the physician's office or an independent lab.
 
\2\ Includes physician-administered drugs, ambulatory surgical center facility costs, ambulance services,
  parenteral and enteral drug costs, supplies, etc.
\3\ Includes services paid under the lab fee schedule furnished in the outpatient department of a hospital.
\4\ Includes services furnished in dialysis facilities, rural health clinics, Federally qualified health
  centers, rehabilitation and psychiatric hospitals, etc.
\5\ Includes transfers to Medicaid. Section 1933(c)(2) of the Act, as added by section 4732(c) of the BBA,
  allocates an amount to be transferred from the Part B account in the SMI trust fund to the state Medicaid
  programs. This transfer is for the purpose of paying the Part B premiums for certain low-income beneficiaries.
  It is not a benefit expenditure but is used in determining the Part B actuarial rates since it is an
  expenditure of the trust fund.
\6\ Includes payment of estimated contingent liability payable to States (to reimburse them for payments they
  have made on behalf of beneficiaries) for probable unasserted claims that resulted from processing errors
  where incorrect Medicare eligibility determinations were made.


 Table 5.--Actuarial Status of the Part B Account in the SMI Trust Fund
 Under Three Sets of Assumptions for Financing Periods Through December
                                31, 2006
------------------------------------------------------------------------
       As of December 31            2004          2005          2006
------------------------------------------------------------------------
This projection:
Actuarial status (in
 millions):
    Assets....................      19,430        21,349        34,766
    Liabilities...............       9,920         9,398         9,209
    Assets less liabilities...       9,510        11,951        25,557
Ratio (in percent) \1\........           6.2           7.3          15.0
Low cost projection:
Actuarial status (in
 millions):
    Assets....................      19,430        21,349        46,939
    Liabilities...............       9,920         8,596         8,664
    Assets less liabilities...       9,510        12,753        38,276
Ratio (in percent) \1\........           6.5           8.5          25.2
High cost projection:
Actuarial status (in
 millions):
    Assets....................      19,430        21,349        22,140
    Liabilities...............       9,920        10,234         9,730
    Assets less liabilities...       9,510        11,114        12,409
Ratio (in percent) \1\........           5.9           6.3           6.5 
------------------------------------------------------------------------
\1\ Ratio of assets less liabilities at the end of the year to the total
  incurred expenditures during the following year, expressed as a
  percent.

III. Regulatory Impact Analysis

    We have examined the impact of this notice as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review) and the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354). 
Executive Order 12866 directs agencies to assess all costs and benefits 
of available regulatory alternatives and, if regulation is necessary, 
to select regulatory approaches that maximize net benefits (including 
potential economic, environmental, public health and safety effects, 
distributive impacts, and equity).
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
$6 million to $29 million in any 1-year. For purposes of the RFA, small 
entities include small businesses, nonprofit organizations, and small 
governmental jurisdictions.
    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

[[Page 55903]]

determined that this notice will not have a significant effect on a 
substantial number of small entities or on the operations of a 
substantial number of small rural hospitals. Therefore, we are not 
preparing analyses for either the RFA or section 1102(b) of the Act.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in expenditure in any 1 year by State, 
local, or tribal governments, in the aggregate, or by the private 
sector, of $110 million. This notice has no consequential effect on 
State, local, or tribal governments. We believe the private sector 
costs of this notice fall below this threshold as well.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it publishes a proposed rule (and subsequent 
final rule) that imposes substantial direct compliance costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. We have determined that this notice does not 
significantly affect the rights, roles, and responsibilities of States.
    This notice announces that the monthly actuarial rates applicable 
for 2006 are $176.90 for enrollees age 65 and over and $203.70 for 
disabled enrollees under age 65. It also announces that the monthly 
Part B premium rate for calendar year 2006 is $88.50 and that the Part 
B deductible for calendar year 2006 is $124.00. The Part B premium rate 
of $88.50 is 13.2 percent higher than the $78.20 premium rate for 2005. 
We estimate that this increase will cost approximately 40 million Part 
B enrollees about $4.9 billion for 2006. In addition, we estimate that 
the increase in the annual deductible will cost approximately $0.4 
billion in 2006. Therefore, this notice is a major rule as defined in 
Title 5, United States Code, section 804(2) and is an economically 
significant rule under Executive Order 12866.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

IV. Waiver of Proposed Notice

    The Medicare statute requires the publication of the monthly 
actuarial rates and the Part B premium amounts in September. We 
ordinarily use general notices, rather than notice and comment 
rulemaking procedures, to make such announcements. In doing so, we note 
that, under the Administrative Procedure Act, interpretive rules, 
general statements of policy, and rules of agency organization, 
procedure, or practice are excepted from the requirements of notice and 
comment rulemaking.
    We considered publishing a proposed notice to provide a period for 
public comment. However, we may waive that procedure if we find, for 
good cause, that prior notice and comment are impracticable, 
unnecessary, or contrary to the public interest. We find that the 
procedure for notice and comment is unnecessary because the formula 
used to calculate the Part B premium is statutorily directed, and we 
can exercise no discretion in applying that formula. Moreover, the 
statute establishes the time period for which the premium rates will 
apply, and delaying publication of the Part B premium rate such that it 
would not be published before that time would be contrary to the public 
interest. Therefore, we find good cause to waive publication of a 
proposed notice and solicitation of public comments.

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

    Dated: September 12, 2005.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.

    Approved: September 15, 2005.
Michael O. Leavitt,
Secretary.
[FR Doc. 05-18837 Filed 9-16-05; 4 pm]
BILLING CODE 4120-01-P