Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Notices 54571 

FDA has a guidance document that 

provides information for those 

interested in participating in this 

program. The guidance is entitled 

‘‘Implementation of the Inspection by 

Accredited Persons Program Under the 

Medical Device User Fee and 

Modernization Act of 2002; 

Accreditation Criteria.’’ 

FDA estimates the burden of this 

collection of information as follows: 

TABLE 1.—ESTIMATED ANNUAL REPORTING BURDEN1

FD&C Act 

Section: 

No. of 

Respondents 

Annual Frequency 

per Response 

Total Annual 

Responses 

Hours per 

Response Total Hours 

704(g) 3 1 3 80 240 

1There are no capital costs or operating and maintenance costs associated with this collection of information 

FDA based these estimates on 

conversations with industry, trade 

association representatives, and internal 

FDA estimates. Once an organization is 

accredited, it will not be required to 

reapply. 

Dated: October 7, 2009. 

David Horowitz, 

Assistant Commissioner for Policy. 

[FR Doc. E9–25395 Filed 10–21–09; 8:45 am] 

BILLING CODE 4160–01–S 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

National Institutes of Health 

Notice of Establishment 

Pursuant to the Federal Advisory 

Committee Act, as amended (5 U.S.C. 

Appendix 2), the Director, National 

Institutes of Health (NIH), announces 

the establishment of the 

Interdisciplinary Molecular Sciences 

and Training Integrated Review Group, 

(IRG). 

The IRG shall advise the Director, 

National Institutes of Health (NIH), and 

the Director, Center for Scientific 

Review (CSR), on the scientific and 

technical merit of applications for 

grants-in-aid for research, research 

training or research-related grants and 

cooperative agreements, or contract 

proposals relating to scientific areas 

relevant to biological chemistry, 

biophysics and cell biology, drug 

discovery and development, devices 

and detection systems, biomaterials, 

delivery systems and nanotechnology, 

computational biology, imaging and 

data mining, genes, genomes and 

genetics, environmental monitoring, and 

basic translational oncology. 

Duration of this committee will be 

continuing with no specified end date. 

Dated: October 9, 2009. 

Francis S. Collins, 

Director, National Institutes of Health. 

[FR Doc. E9–25374 Filed 10–21–09; 8:45 am] 

BILLING CODE 4140–01–M 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

[CMS–8039–N] 

RIN 0938–AP48 

Medicare Program; Medicare Part B 

Monthly Actuarial Rates, Premium 

Rate, and Annual Deductible 

Beginning January 1, 2010 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Notice. 

SUMMARY: This notice announces the 

monthly actuarial rates for aged (age 65 

and over) and disabled (under age 65) 

beneficiaries enrolled in Part B of the 

Medicare Supplementary Medical 

Insurance (SMI) program beginning 

January 1, 2010. In addition, this notice 

announces the monthly premium for 

aged and disabled beneficiaries as well 

as the income-related monthly 

adjustment amounts to be paid by 

beneficiaries with modified adjusted 

gross income above certain threshold 

amounts. The monthly actuarial rates 

for 2010 are $221.00 for aged enrollees 

and $270.40 for disabled enrollees. The 

standard monthly Part B premium rate 

for 2010 is $110.50, which is equal to 

50 percent of the monthly actuarial rate 

for aged enrollees or roughly 25 percent 

of the expected average total cost of Part 

B coverage for aged enrollees. (The 2009 

standard premium rate was $96.40.) The 

Part B deductible for 2010 is $155.00 for 

all Part B beneficiaries. A beneficiary 

who has to pay an income-related 

monthly adjustment may have to pay a 

total monthly premium of roughly 35, 

50, 65 or 80 percent of the total cost of 

Part B coverage. 

DATES: Effective Date: January 1, 2010. 

FOR FURTHER INFORMATION CONTACT: M. 

Kent Clemens, (410) 786–6391. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Part B is the voluntary portion of the 

Medicare program that pays all or part 

of the costs for physicians’ services, 

outpatient hospital services, certain 

home health services, services furnished 

by rural health clinics, ambulatory 

surgical centers, comprehensive 

outpatient rehabilitation facilities, and 

certain other medical and health 

services not covered by Medicare Part 

A, Hospital Insurance. Medicare Part B 

is available to individuals who are 

entitled to Medicare Part A, as well as 

to U.S. residents who have attained age 

65 and are citizens, and aliens who were 

lawfully admitted for permanent 

residence and have resided in the 

United States for 5 consecutive years. 

Part B requires enrollment and payment 

of monthly premiums, as provided for 

in 42 CFR part 407, subpart B, and part 

408, respectively. Part B costs are met 

by payments from the Part B account of 

the Supplementary Medical Insurance 

Trust Fund, which is funded by the 

premiums paid by all enrollees and 

general revenues of the Federal 

Government. 

The Secretary of the Department of 

Health and Human Services (the 

Secretary) is required by section 1839 of 

the Social Security Act (the Act) to 

announce the Part B monthly actuarial 

rates for aged and disabled beneficiaries 

as well as the monthly Part B premium. 

The Part B annual deductible is 

included because its determination is 

directly linked to the aged actuarial rate. 

The monthly actuarial rates for aged 

and disabled enrollees are used to 

determine the correct amount of general 

revenue financing per beneficiary each 

month. These rates, according to 

actuarial estimates, will initially equal, 

respectively, one-half the expected 

average monthly cost of Part B for each 

aged enrollee (age 65 or over) and onehalf the expected average monthly cost 

of Part B for each disabled enrollee 

(under age 65). The actuarial rates are 

then adjusted to include any margin 

necessary to maintain an adequate 

contingency reserve in the Part B 

account of the Supplementary Medical 

Insurance Trust Fund. 

The Part B deductible to be paid by 

enrollees is also announced. Prior to the 


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54572 Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Notices 

Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 (MMA) (Pub. L. 108–173), the Part 

B deductible was set in statute. After 

setting the 2005 deductible amount at 

$110.00, section 629 of the MMA 

(amending section 1833(b) of the Act) 

requires that the Part B deductible be 

indexed beginning in 2006. The 

inflation factor to be used each year is 

the annual percentage increase in the 

Part B actuarial rate for enrollees age 65 

and over. Specifically, the 2010 Part B 

deductible is calculated by multiplying 

the 2009 deductible by the ratio of the 

2010 aged actuarial rate over the 2009 

aged actuarial rate. The amount 

determined under this formula is then 

rounded to the nearest $1. 

The monthly Part B premium rate to 

be paid by aged and disabled enrollees 

is also announced. (Although the costs 

to the program per disabled enrollee are 

different than for the aged, the statute 

provides that they pay the same 

premium amount.) Beginning with the 

passage of section 203 of the Social 

Security Amendments of 1972 (Pub. L. 

92–603), the premium rate, which was 

determined on a fiscal year basis, was 

limited to the lesser of the actuarial rate 

for aged enrollees, or the current 

monthly premium rate increased by the 

same percentage as the most recent 

general increase in monthly Title II 

Social Security benefits. 

However, the passage of section 124 

of the Tax Equity and Fiscal 

Responsibility Act of 1982 (TEFRA) 

(Pub. L. 97–248) suspended this 

premium determination process. 

Section 124 of TEFRA changed the 

premium basis to 50 percent of the 

monthly actuarial rate for aged enrollees 

(that is, 25 percent of program costs for 

aged enrollees). Section 606 of the 

Social Security Amendments of 1983 

(Pub. L. 98–21), section 2302 of the 

Deficit Reduction Act of 1984 (DEFRA 

84) (Pub. L. 98–369), section 9313 of the 

Consolidated Omnibus Budget 

Reconciliation Act of 1985 (COBRA 85) 

(Pub. L. 99–272), section 4080 of the 

Omnibus Budget Reconciliation Act of 

1987 (OBRA 87) (Pub. L. 100–203), and 

section 6301 of the Omnibus Budget 

Reconciliation Act of 1989 (OBRA 89) 

(Pub. L. 101–239) extended the 

provision that the premium be based on 

50 percent of the monthly actuarial rate 

for aged enrollees (that is, 25 percent of 

program costs for aged enrollees). This 

extension expired at the end of 1990. 

The premium rate for 1991 through 

1995 was legislated by section 

1839(e)(1)(B) of the Act, as added by 

section 4301 of the Omnibus Budget 

Reconciliation Act of 1990 (OBRA 90) 

(Pub. L. 101–508). In January 1996, the 

premium determination basis would 

have reverted to the method established 

by the 1972 Social Security Act 

Amendments. However, section 13571 

of the Omnibus Budget Reconciliation 

Act of 1993 (OBRA 93) (Pub. L. 103–66) 

changed the premium basis to 50 

percent of the monthly actuarial rate for 

aged enrollees (that is, 25 percent of 

program costs for aged enrollees) for 

1996 through 1998. 

Section 4571 of the Balanced Budget 

Act of 1997 (BBA) (Pub. L. 105–33) 

permanently extended the provision 

that the premium be based on 50 

percent of the monthly actuarial rate for 

aged enrollees (that is, 25 percent of 

program costs for aged enrollees). 

The BBA included a further provision 

affecting the calculation of the Part B 

actuarial rates and premiums for 1998 

through 2003. Section 4611 of the BBA 

modified the home health benefit 

payable under Part A for individuals 

enrolled in Part B. Under this section, 

beginning in 1998, expenditures for 

home health services not considered 

‘‘post-institutional’’ are payable under 

Part B rather than Part A. However, 

section 4611(e)(1) of the BBA required 

that there be a transition from 1998 

through 2002 for the aggregate amount 

of the expenditures transferred from 

Part A to Part B. Section 4611(e)(2) of 

the BBA also provided a specific yearly 

proportion for the transferred funds. 

The proportions were 1⁄6 for 1998, 1⁄3 for 

1999, 1⁄2 for 2000, 2⁄3 for 2001, and 5⁄6

for 2002. For the purpose of determining 

the correct amount of financing from 

general revenues of the Federal 

Government, it was necessary to include 

only these transitional amounts in the 

monthly actuarial rates for both aged 

and disabled enrollees, rather than the 

total cost of the home health services 

being transferred. 

Section 4611(e)(3) of the BBA also 

specified, for the purpose of 

determining the premium, that the 

monthly actuarial rate for enrollees age 

65 and over be computed as though the 

transition would occur for 1998 through 

2003 and that 1⁄7 of the cost be 

transferred in 1998, 2⁄7 in 1999, 3⁄7 in 

2000, 4⁄7 in 2001, 5⁄7 in 2002, and 6⁄7 in 

2003. Therefore, the transition period 

for incorporating this home health 

transfer into the premium was 7 years 

while the transition period for including 

these services in the actuarial rate was 

6 years. 

Section 811 of the Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (Pub. L. 108– 

173), also known as the Medicare 

Modernization Act, or MMA), which 

amended section 1839 of the Act, 

requires that, starting on January 1, 

2007, the Part B premium a beneficiary 

pays each month be based on his or her 

annual income. Specifically, if a 

beneficiary’s ‘‘modified adjusted gross 

income’’ is greater than the legislated 

threshold amounts (for 2010, $85,000 

for a beneficiary filing an individual 

income tax return, and $170,000 for a 

beneficiary filing a joint tax return) the 

beneficiary is responsible for a larger 

portion of the estimated total cost of 

Part B benefit coverage. In addition to 

the standard 25 percent premium, these 

beneficiaries have to pay an incomerelated monthly adjustment amount. 

The MMA made no change to the 

actuarial rate calculation, and the 

standard premium, which will continue 

to be paid by beneficiaries whose 

modified adjusted gross income is 

below the applicable thresholds, still 

represents approximately 25 percent of 

the estimated total cost to the program 

of Part B coverage for an aged enrollee. 

However, depending on income and tax 

filing status, a beneficiary could be 

responsible for 35, 50, 65 or 80 percent 

of the estimated total cost of Part B 

coverage, rather than 25 percent. The 

end result of the higher premium is that 

the Part B premium subsidy is reduced 

and less general revenue financing is 

required for beneficiaries with higher 

income because they are paying a larger 

share of the total cost with their 

premium. That is, the premium subsidy 

will continue to be approximately 75 

percent for beneficiaries with income 

below the applicable income thresholds, 

but will be reduced for beneficiaries 

with income above these thresholds. 

The MMA specified that there be a 5- 

year transition to full implementation of 

this provision. However, section 5111 of 

the Deficit Reduction Act of 2005 (DRA) 

(Pub. L. 109–171) modified the 

transition to a 3-year period. The full 

reduction in the Part B premium 

subsidy for beneficiaries with incomes 

above the applicable thresholds is in 

effect for calendar years 2009 and later. 

Section 4732(c) of the BBA added 

section 1933(c) of the Act, which 

required the Secretary to allocate money 

from the Part B trust fund to the State 

Medicaid programs for the purpose of 

providing Medicare Part B premium 

assistance from 1998 through 2002 for 

the low-income Medicaid beneficiaries 

who qualify under section 1933 of the 

Act. This allocation, while not a benefit 

expenditure, was an expenditure of the 

trust fund and was included in 

calculating the Part B actuarial rates 

through 2002. For 2003 through 2010, 

the allocation was temporarily 

extended. 

A further provision affecting the 

calculation of the Part B premium is 


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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 ‘‘holdharmless’’ provision, provides that if an 

individual is entitled to benefits under 

section 202 or 223 of the Act (the OldAge and Survivors Insurance Benefit 

and the Disability Insurance Benefit, 

respectively) and has the Part B 

premiums deducted from these benefit 

payments, the premium increase will be 

reduced, if necessary, to avoid causing 

a decrease in the individual’s net 

monthly payment. This decrease in 

payment occurs if the increase in the 

individual’s social security benefit due 

to the cost-of-living adjustment under 

section 215(i) of the Act is less than the 

increase in the premium. Specifically, 

the reduction in the premium amount 

applies if the individual is entitled to 

benefits under section 202 or 223 of the 

Act for November and December of a 

particular year and the individual’s Part 

B premiums for December and the 

following January are deducted from the 

respective month’s section 202 or 223 

benefits. The ‘‘hold-harmless’’ provision 

does not apply to beneficiaries who are 

required to pay an income-related 

monthly adjustment amount. 

A check for benefits under section 202 

or 223 of the Act is received in the 

month following the month for which 

the benefits are due. The Part B 

premium that is deducted from a 

particular check is the Part B payment 

for the month in which the check is 

received. Therefore, a benefit check for 

November is not received until 

December, but has December’s Part B 

premium deducted from it. 

Generally, if a beneficiary qualifies for 

hold-harmless protection, that is, if the 

beneficiary was in current payment 

status for November and December of 

the previous year, the reduced premium 

for the individual for that January and 

for each of the succeeding 11 months for 

which he or she is entitled to benefits, 

under section 202 or 203 of the Act, is 

the greater of the following— 

• The monthly premium for January 

reduced as necessary to make the 

December monthly benefits, after the 

deduction of the Part B premium for 

January, at least equal to the preceding 

November’s monthly benefits, after the 

deduction of the Part B premium for 

December; or 

• The monthly premium for that 

individual for that December. 

In determining the premium 

limitations under section 1839(f) of the 

Act, the monthly benefits to which an 

individual is entitled under section 202 

or 223 of the Act do not include 

retroactive adjustments or payments and 

deductions on account of work. Also, 

once the monthly premium amount is 

established under section 1839(f) of the 

Act, it will not be changed during the 

year even if there are retroactive 

adjustments or payments and 

deductions on account of work that 

apply to the individual’s monthly 

benefits. 

Individuals who have enrolled in Part 

B late or who have re-enrolled after the 

termination of a coverage period are 

subject to an increased premium under 

section 1839(b) of the Act. The increase 

is a percentage of the premium and is 

based on the new premium rate before 

any reductions under section 1839(f) of 

the Act are made. 

II. Provisions of the Notice 

A. Notice of Medicare Part B Monthly 

Actuarial Rates, Monthly Premium 

Rates, and Annual Deductible 

The Medicare Part B monthly 

actuarial rates applicable for 2010 are 

$221.00 for enrollees age 65 and over 

and $270.40 for disabled enrollees 

under age 65. Section II.B. of this notice 

below, presents the actuarial 

assumptions and bases from which 

these rates are derived. The Part B 

standard monthly premium rate for 

2010 is $110.50. The Part B annual 

deductible for 2010 is $155.00. Listed 

below are the 2010 Part B monthly 

premium rates to be paid by 

beneficiaries who file an individual tax 

return (including those who are single, 

head of household, qualifying 

widow(er) with dependent child, or 

married filing separately who lived 

apart from their spouse for the entire 

taxable year), or a joint tax return. (The 

income thresholds are indexed to the 

Consumer Price Index and rounded to 

the nearest $1,000.) 

Beneficiaries who file an individual tax return with 

income: Beneficiaries who file a joint tax return with income: 

Income-related 

monthly adjustment 

amount 

Total monthly 

premium amount 

Less than or equal to $85,000 ................................. Less than or equal to $170,000 ............................... $0.00 $110.50 

Greater than $85,000 and less than or equal to 

$107,000.

Greater than $170,000 and less than or equal to 

$214,000.

44.20 154.70 

Greater than $107,000 and less than or equal to 

$160,000.

Greater than $214,000 and less than or equal to 

$320,000.

110.50 221.00 

Greater than $160,000 and less than or equal to 

$214,000.

Greater than $320,000 and less than or equal to 

$428,000.

176.80 287.30 

Greater than $214,000 ............................................. Greater than $428,000 ............................................. 243.10 353.60 

In addition, the monthly premium 

rates to be paid by beneficiaries who are 

married and lived with their spouse at 

any time during the taxable year, but file 

a separate tax return from their spouse, 

are listed below. 

Beneficiaries who are married and lived with their spouse at any time during the year, but file a separate 

tax return from their spouse: 

Income-related 

monthly adjustment amount 

Total monthly 

premium amount 

Less than or equal to $85,000 ........................................................................................................................ $0.00 $110.50 

Greater than $85,000 and less than or equal to $129,000 ............................................................................. 176.80 287.30 

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


dcolon on DSK2BSOYB1PROD with NOTICES
54574 Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Notices 

The Part B annual deductible for 2010 

is $155.00 for all beneficiaries. 

B. Statement of Actuarial Assumptions 

and Bases Employed in Determining the 

Monthly Actuarial Rates and the 

Monthly Premium Rate for Part B 

Beginning January 2010 

1. Actuarial Status of the Part B Account 

in the Supplementary Medical 

Insurance Trust Fund 

Under the statute, the starting point 

for determining the standard monthly 

premium is the amount that would be 

necessary to finance Part B on an 

incurred basis. This is the amount of 

income that would be sufficient to pay 

for services furnished during that year 

(including associated administrative 

costs) even though payment for some of 

these services will not be made until 

after the close of the year. The portion 

of income required to cover benefits not 

paid until after the close of the year is 

added to the trust fund and used when 

needed. 

The premium rates are established 

prospectively and are, therefore, subject 

to projection error. Additionally, 

legislation enacted after the financing 

was established, but effective for the 

period in which the financing is set, 

may affect program costs. As a result, 

the income to the program may not 

equal incurred costs. Therefore, trust 

fund assets must be maintained at a 

level that is adequate to cover an 

appropriate degree of variation between 

actual and projected costs, and the 

amount of incurred, but unpaid, 

expenses. Numerous factors determine 

what level of assets is appropriate to 

cover variation between actual and 

projected costs. The three most 

important of these factors are: (1) The 

difference from prior years between the 

actual performance of the program and 

estimates made at the time financing 

was established; (2) the likelihood and 

potential magnitude of expenditure 

changes resulting from enactment of 

legislation affecting Part B costs in a 

year subsequent to the establishment of 

financing for that year, and (3) the 

expected relationship between incurred 

and cash expenditures. These factors are 

analyzed on an ongoing basis, as the 

trends can vary over time. 

Table 1 summarizes the estimated 

actuarial status of the trust fund as of 

the end of the financing period for 2008 

and 2009. 

TABLE 1—ESTIMATED ACTUARIAL STATUS OF THE PART B ACCOUNT IN THE SUPPLEMENTARY MEDICAL INSURANCE TRUST

FUND AS OF THE END OF THE FINANCING PERIOD

Financing period ending Assets 

(millions) 

Liabilities 

(millions) 

Assets less 

liabilities 

(millions) 

December 31, 2008 ..................................................................................................................... $59,382 $12,490 $46,892 

December 31, 2009 ..................................................................................................................... 59,876 13,999 45,876 

2. Monthly Actuarial Rate for Enrollees 

Age 65 and Older 

The monthly actuarial rate for 

enrollees age 65 and older is one-half of 

the sum of monthly amounts for: (1) The 

projected cost of benefits; and (2) 

administrative expenses for each 

enrollee age 65 and older, after 

adjustments to this sum to allow for 

interest earnings on assets in the trust 

fund and an adequate contingency 

margin. The contingency margin is an 

amount appropriate to provide for 

possible variation between actual and 

projected costs and to amortize any 

surplus assets or unfunded liabilities. 

The monthly actuarial rate for 

enrollees age 65 and older for 2010 is 

determined by first establishing perenrollee cost by type of service from 

program data through 2008 and then 

projecting these costs for subsequent 

years. The projection factors used for 

financing periods from January 1, 2007 

through December 31, 2010 are shown 

in Table 2. 

As indicated in Table 3, the projected 

monthly rate required to pay for onehalf of the total of benefits and 

administrative costs for enrollees age 65 

and over for 2010 is $189.84. Based on 

current estimates, the assets are not 

sufficient to cover the amount of 

incurred, but unpaid, expenses and to 

provide for a significant degree of 

variation between actual and projected 

costs. Thus, a positive contingency 

margin is needed to increase assets to a 

more appropriate level. The monthly 

actuarial rate of $221.00 provides an 

adjustment of $34.32 for a contingency 

margin and –$3.16 for interest earnings. 

The size of the contingency margin for 

2010 is affected by several factors. The 

first and largest factor involves current 

law formula for physician fees, which 

will result in a reduction in physician 

fees of approximately 21 percent in 

2010 and is projected to cause 

additional reductions in subsequent 

years. Smaller scheduled reductions in 

physician payments have been 

legislatively avoided in every year since 

2002. In recognition of the strong 

possibility of substantial increases in 

Part B expenditures that would result 

from similar legislation to override the 

decreases in physician fees in 2010 or 

later years, it is appropriate to maintain 

a significantly larger Part B contingency 

reserve than would otherwise be 

necessary. The asset level projected for 

the end of 2009 is not adequate to 

accommodate this contingency. 

A second, much smaller factor 

underlying the need for an adequate 

contingency reserve, is the possibility 

for increased Part B costs in 2010 as a 

result of a serious flu season. 

The third factor has a large impact on 

the level of the contingency reserve. As 

noted previously, for most Part B 

beneficiaries the hold-harmless 

provision prevents their benefits under 

section 202 or 223 of the Act from 

decreasing as a result of an increase in 

the Part B premium. The increase in the 

benefits under section 202 and 223 of 

the Act is nearly certain to be 0 percent 

for 2010 and possibly for 2011. As a 

result, the increase in the Part B 

premium for 2010 (the $14.10 increase 

from the 2009 standard monthly 

premium of $96.40 to the 2010 standard 

monthly premium of $110.50) will be 

paid by only a small percentage of Part 

B enrollees. (Approximately 27 percent 

of beneficiaries are not subject to the 

hold-harmless provision because they 

are subject to the income-related 

additional premium amount (5 percent), 

they are new enrollees during the year 

(3 percent), or they do not have their 

Part B premiums withheld from social 

security benefit payments (19 percent), 

including those who qualify for both 

Medicare and Medicaid and have their 

Part B premiums paid on their behalf by 

Medicaid (17 percent).) In order for Part 

B to be adequately funded in 2010, the 

2010 contingency margin has been 

increased to account for this situation. 

However, the result is a larger-thanusual premium paid by or on behalf of 

a minority of Part B enrollees. 

The traditional goal for the Part B 

reserve has been that assets minus 

liabilities at the end of a year should 


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represent between 15 and 20 percent of 

the following year’s total incurred 

expenditures. Within this range, 17 

percent has been the normal target. In 

view of the high probability that 

premiums and matching general 

revenues in 2010 will be inadequate, 

due to the hold-harmless provision, and 

the strong likelihood of actual 

expenditures exceeding estimated 

levels, due to the enactment of 

legislation after the financing has been 

set for a given year, a contingency 

reserve ratio in excess of 20 percent of 

the following year’s expenditures would 

better ensure that the assets of the Part 

B account can adequately cover the cost 

of incurred-but-not-reported benefits 

together with variations between actual 

and estimated cost levels. 

The actuarial rate of $221.00 per 

month for aged beneficiaries, as 

announced in this notice for 2010, 

reflects the combined net effect of the 

factors described above and the 

projection assumptions listed in Table 

2. 

3. Monthly Actuarial Rate for Disabled 

Enrollees 

Disabled enrollees are those persons 

under age 65 who are enrolled in Part 

B because of entitlement to Social 

Security disability benefits for more 

than 24 months or because of 

entitlement to Medicare under the endstage 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 onehalf of the total of benefits and 

administrative costs for disabled 

enrollees for 2010 is $222.93. The 

monthly actuarial rate of $270.40 also 

provides an adjustment of –$3.64 for 

interest earnings and $51.11 for a 

contingency margin, reflecting the same 

factors described above for the aged 

actuarial rate. Based on current 

estimates, the assets associated with the 

disabled Medicare beneficiaries are not 

sufficient to cover the amount of 

incurred, but unpaid, expenses and to 

provide for a significant degree of 

variation between actual and projected 

costs. Thus, a large contingency margin 

is needed to increase assets to an 

appropriate level. 

The actuarial rate of $270.40 per 

month for disabled beneficiaries, as 

announced in this notice for 2010, 

reflects the combined net effect of the 

factors described above for aged 

beneficiaries and the projection 

assumptions listed in Table 2. 

4. Sensitivity Testing 

Several factors contribute to 

uncertainty about future trends in 

medical care costs. It is appropriate to 

test the adequacy of the rates using 

alternative assumptions. The results of 

those assumptions are shown in Table 5. 

One set represents increases that are 

lower and, therefore, more optimistic 

than the current estimate. The other set 

represents increases that are higher and, 

therefore, more pessimistic than the 

current estimate. The values for the 

alternative assumptions were 

determined from a statistical analysis of 

the historical variation in the respective 

increase factors. 

As indicated in Table 5, the monthly 

actuarial rates would result in an excess 

of assets over liabilities of $66,192 

million by the end of December 2010 

under the assumptions used in 

preparing this report. This amounts to 

31 percent of the estimated total 

incurred expenditures for the following 

year. 

Assumptions that are somewhat more 

pessimistic (and that therefore test the 

adequacy of the assets to accommodate 

projection errors) produce a surplus of 

$42,525 million by the end of December 

2010, which amounts to 18 percent of 

the estimated total incurred 

expenditures for the following year. 

Under fairly optimistic assumptions, the 

monthly actuarial rates would result in 

a surplus of $89,783 million by the end 

of December 2010, or 47 percent of the 

estimated total incurred expenditures 

for the following year. 

The above analysis indicates that the 

premium and general revenue financing 

established for 2010, together with 

existing Part B account assets would be 

adequate to cover estimated Part B costs 

for 2010 under current law, even if 

actual costs prove to be somewhat 

greater than expected. 

5. Premium Rates and Deductible 

As determined in accordance with 

section 1839 of the Act, listed below are 

the 2010 Part B monthly premium rates 

to be paid by beneficiaries who file an 

individual tax return (including those 

who are single, head of household, 

qualifying widow(er) with dependent 

child, or married filing separately who 

lived apart from their spouse for the 

entire taxable year), or a joint tax return. 

Beneficiaries who file an individual tax return with 

income: Beneficiaries who file a joint tax return with income: 

Income-related 

monthly adjustment amount 

Total monthly 

premium amount 

Less than or equal to $85,000 ................................. Less than or equal to $170,000 ............................... $0.00 $110.50 

Greater than $85,000 and less than or equal to 

$107,000.

Greater than $170,000 and less than or equal to 

$214,000.

44.20 154.70 

Greater than $107,000 and less than or equal to 

$160,000.

Greater than $214,000 and less than or equal to 

$320,000.

110.50 221.00 

Greater than $160,000 and less than or equal to 

$214,000.

Greater than $320,000 and less than or equal to 

$428,000.

176.80 287.30 

Greater than $214,000 ............................................. Greater than $428,000 ............................................. 243.10 353.60 

In addition, the monthly premium 

rates to be paid by beneficiaries who are 

married and lived with their spouse at 

any time during the taxable year, but file 

a separate tax return from their spouse, 

are listed below. 

Beneficiaries who are married and lived with their spouse at any time during the year, but file a separate 

tax return from their spouse: 

Income-related 

monthly adjustment amount 

Total monthly 

premium amount 

Less than or equal to $85,000 ........................................................................................................................ $0.00 $110.50 

Greater than $85,000 and less than or equal to $129,000 ............................................................................. 176.80 287.30 


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54576 Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Notices 

Beneficiaries who are married and lived with their spouse at any time during the year, but file a separate 

tax return from their spouse: 

Income-related 

monthly adjustment amount 

Total monthly 

premium amount 

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

TABLE 2—PROJECTION FACTORS112-MONTH PERIODS ENDING DECEMBER 31 OF 2007–2010 

[In percent] 

Calendar year 

Physicians’ services Durable 

medical 

equipment 

Carrier 

LAB4

Other 

carrier 

services5

Outpatient 

hospital 

Home 

health 

agency 

Hospital 

LAB6

Other intermediary 

services7

Managed 

care Fees2 Residual3

Aged: 

2007 ............................................... ¥1.4 3.5 2.9 9.8 4.7 8.5 18.8 3.2 8.4 3.6 

2008 ............................................... 0.4 3.8 7.6 7.9 4.7 4.9 11.6 3.9 5.0 5.1 

2009 ............................................... 1.7 4.0 ¥2.1 11.1 7.4 8.9 13.4 9.3 8.9 2.0 

2010 ............................................... ¥21.7 8.1 2.9 3.7 4.4 5.1 1.4 ¥1.7 5.1 ¥1.9 

Disabled: 

2007 ............................................... ¥1.4 3.4 3.6 13.1 6.7 8.8 20.7 6.1 8.8 4.5 

2008 ............................................... 0.4 4.1 7.8 12.4 9.1 6.8 9.8 5.7 6.9 4.8 

2009 ............................................... 1.7 5.5 1.3 15.6 10.0 9.6 14.2 10.4 9.6 1.9 

2010 ............................................... ¥21.7 8.1 3.2 3.6 3.6 5.1 1.8 ¥1.7 5.1 ¥2.1 

1All values for services other than managed care are per fee-for-service enrollee. Managed care values are per managed care enrollee. 2As recognized for payment under the program. 

3 Increase in the number of services received per enrollee and greater relative use of more expensive services. 

4 Includes services paid under the lab fee schedule furnished in the physician’s office or an independent lab. 

5 Includes physician-administered drugs, ambulatory surgical center facility costs, ambulance services, parenteral and enteral drug costs, supplies, etc. 6 Includes services paid under the lab fee schedule furnished in the outpatient department of a hospital. 

7 Includes services furnished in dialysis facilities, rural health clinics, Federally qualified health centers, rehabilitation and psychiatric hospitals, etc. 

TABLE 3—DERIVATION OF MONTHLY ACTUARIAL RATE FOR ENROLLEES AGE 65 AND OVER FOR FINANCING PERIODS

ENDING DECEMBER 31, 2007 THROUGH DECEMBER 31, 2010 

Financing periods 

CY 2007 CY 2008 CY 2009 CY 2010 

Covered services (at level recognized): 

Physician fee schedule ............................................................................. 78.46 78.70 81.13 68.34 

Durable medical equipment ...................................................................... 9.65 9.99 9.53 9.75 

Carrier lab 1 ............................................................................................... 3.96 4.11 4.45 4.59 

Other carrier services 2 ............................................................................. 19.74 19.88 20.81 21.60 

Outpatient hospital .................................................................................... 29.87 30.18 32.03 33.48 

Home health .............................................................................................. 9.84 10.57 11.67 11.76

Hospital lab 3 ............................................................................................. 2.80 2.79 2.98 2.91 

Other intermediary services 4 .................................................................... 13.26 13.53 14.54 13.93 

Managed care ........................................................................................... 41.93 49.89 54.74 54.51 

Total services ..................................................................................... 209.51 219.65 231.87 220.87 

Cost sharing: 

Deductible ................................................................................................. ¥5.33 ¥5.49 ¥5.50 ¥6.32 

Coinsurance .............................................................................................. ¥30.74 ¥30.31 ¥31.42 ¥28.29 

Total benefits ..................................................................................... 173.44 183.84 194.95 186.26 

Administrative expenses .................................................................................. 5.68 2.95 3.41 3.58 

Incurred expenditures ...................................................................................... 179.12 186.79 198.36 189.84 

Value of interest ............................................................................................... ¥1.98 ¥3.35 ¥2.83 ¥3.16 

Contingency margin for projection error and to amortize the surplus or deficit ................................................................................................................. 9.86 9.26 ¥2.83 34.32 

Monthly actuarial rate ............................................................................... 187.00 192.70 192.70 221.00 

1 Includes services paid under the lab fee schedule furnished in the physician’s office or an independent lab. 

2 Includes physician-administered drugs, ambulatory surgical center facility costs, ambulance services, parenteral and enteral drug costs, supplies, etc. 3 Includes services paid under the lab fee schedule furnished in the outpatient department of a hospital. 

4 Includes services furnished in dialysis facilities, rural health clinics, Federally qualified health centers, and rehabilitation and psychiatric hospitals, etc. 


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Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Notices 54577 

TABLE 4—DERIVATION OF MONTHLY ACTUARIAL RATE FOR DISABLED ENROLLEES FOR FINANCING PERIODS ENDING

DECEMBER 31, 2007 THROUGH DECEMBER 31, 2010 

Financing periods 

CY 2007 CY 2008 CY 2009 CY 2010 

Covered services (at level recognized): 

Physician fee schedule ............................................................................. 78.44 79.83 84.46 71.37 

Durable medical equipment ...................................................................... 16.95 17.76 17.76 18.29 

Carrier lab 1 ............................................................................................... 5.00 5.41 6.10 6.31 

Other carrier services 2 ............................................................................. 23.11 24.47 26.57 27.45 

Outpatient hospital .................................................................................... 40.10 41.44 44.75 46.92 

Home health ............................................................................................. 8.24 8.79 9.89 10.05 

Hospital lab 3 ............................................................................................. 4.37 4.47 4.85 4.75 

Other intermediary services 4 ................................................................... 40.76 41.29 43.26 43.48 

Managed care ........................................................................................... 29.87 36.50 39.83 39.49 

Total services .................................................................................... 246.85 259.96 277.47 268.11 

Cost sharing: 

Deductible ................................................................................................. ¥5.00 ¥5.11 ¥5.15 ¥5.92 

Coinsurance .............................................................................................. ¥43.83 ¥44.25 ¥46.42 ¥43.08 

Total benefits ..................................................................................... 198.03 210.60 225.90 219.11 

Administrative expenses .................................................................................. 3.85 3.37 3.66 3.82 

Incurred expenditures ...................................................................................... 201.88 213.97 229.56 222.93 

Value of interest ............................................................................................... ¥3.37 ¥4.32 ¥3.29 ¥3.64 

Contingency margin for projection error and to amortize the surplus or deficit ................................................................................................................. ¥1.21 0.05 ¥2.07 51.11 

Monthly actuarial rate ............................................................................... 197.30 209.70 224.20 270.40 

1 Includes services paid under the lab fee schedule furnished in the physician’s office or an independent lab. 

2 Includes physician-administered drugs, ambulatory surgical center facility costs, ambulance services, parenteral and enteral drug costs, supplies, etc. 3 Includes services paid under the lab fee schedule furnished in the outpatient department of a hospital. 

4 Includes services furnished in dialysis facilities, rural health clinics, Federally qualified health centers, rehabilitation and psychiatric hospitals, 

etc. 

TABLE 5—ACTUARIAL STATUS OF THE PART B ACCOUNT IN THE SMI TRUST FUND UNDER THREE SETS OF ASSUMPTIONS

FOR FINANCING PERIODS THROUGH DECEMBER 31, 2010 

As of December 31, 2008 2009 2010 

This projection: 

Actuarial status (in millions): .......................................................................................... .......................... .......................... ..........................

Assets ............................................................................................................................. 59,382 59,876 79,611 

Liabilities ......................................................................................................................... 12,490 13,999 13,419 

Assets less liabilities ....................................................................................................... 46,892 45,876 66,192 

Ratio (in percent) 1 .................................................................................................. 22 .6 22 .7 31 .4 

Low cost projection: .......................... .......................... ..........................

Actuarial status (in millions): .......................................................................................... .......................... .......................... ..........................

Assets ............................................................................................................................. 59,382 67,931 102,532 

Liabilities ......................................................................................................................... 12,490 13,188 12,748 

Assets less liabilities ....................................................................................................... 46,892 54,744 89,783 

Ratio (in percent) 1 .................................................................................................. 23 .6 29 .2 47 .4 

High cost projection: .......................... .......................... ..........................

Actuarial status (in millions): .......................................................................................... .......................... .......................... ..........................

Assets ............................................................................................................................. 59,382 52,148 56,681 

Liabilities ......................................................................................................................... 12,490 14,778 14,156 

Assets less liabilities ....................................................................................................... 46,892 37,370 42,525 

Ratio (in percent)1 ................................................................................................... 21 .8 17 .2 18 .2 

1 Ratio of assets less liabilities at the end of the year to the total incurred expenditures during the following year, expressed as a percent. 

III. Regulatory Impact Analysis 

We have examined the impacts of this 

notice as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), the 

Regulatory Flexibility Act (RFA) 

(September 19, 1980, Pub. L. 96–354), 

section 1102(b) of the Social Security 

Act, section 202 of the Unfunded 


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54578 Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Notices 

Mandates Reform Act of 1995 (Pub. L. 

104–4), Executive Order 13132 on 

Federalism (August 4, 1999), and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Order 12866 directs 

agencies to assess all costs and benefits 

of available regulatory alternatives and, 

if regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety effects, distributive impacts, 

and equity). A regulatory impact 

analysis (RIA) must be prepared for 

major rules with economically 

significant effects ($100 million or more 

in any one year). 

We have examined the impact of this 

notice as required by Executive Order 

12866 (September 1993, Regulatory 

Planning and Review) and the 

Regulatory Flexibility Act (RFA) 

(September 19, 1980, Pub. L. 96–354). 

Executive Order 12866 directs agencies 

to assess all costs and benefits of 

available regulatory alternatives and, if 

regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety effects, distributive impacts, 

and equity). 

The RFA requires agencies to analyze 

options for regulatory relief of small 

businesses, if a rule has a significant 

impact on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of $7 million to $34.5 million in any 1 

year. Individuals and States are not 

included in the definition of a small 

entity. Therefore, the Secretary has 

determined that this notice will not 

have a significant economic impact on 

a substantial number of small entities. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a Metropolitan Statistical Area and has 

fewer than 100 beds. The Secretary has 

determined that this notice will not 

have a significant impact on the 

operations of a substantial number of 

small rural hospitals. Therefore, we are 

not preparing analyses for either the 

RFA or section 1102(b) of the Act. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates 

require spending in any 1 year of $100 

million in 1995 dollars, updated 

annually for inflation. In 2008, that 

threshold is approximately $133 

million. This notice does not contain 

mandates that will impose spending 

costs on State, local or tribal 

governments in the aggregate, or by the 

private sector in any one year of $133 

million or more. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it publishes a proposed 

rule (and subsequent final rule) that 

imposes substantial direct compliance 

costs on State and local governments, 

preempts State law, or otherwise has 

Federalism implications. We have 

determined that this notice does not 

significantly affect the rights, roles, and 

responsibilities of States. 

This notice announces that the 

monthly actuarial rates applicable for 

2010 are $221.00 for enrollees age 65 

and over and $270.40 for disabled 

enrollees under age 65. The Part B 

deductible for calendar year 2010 is 

$155.00. The notice also announces the 

2010 monthly Part B premium rates to 

be paid by beneficiaries who file an 

individual tax return (including those 

who are single, head of household, 

qualifying widow(er) with a dependent 

child, or married filing separately who 

lived apart from their spouse for the 

entire taxable year), or a joint tax return. 

Beneficiaries who file an individual tax return with 

income: Beneficiaries who file a joint tax return with income: 

Income-related 

monthly adjustment amount 

Total monthly 

premium amount 

Less than or equal to $85,000 ................................. Less than or equal to $170,000 ............................... $0.00 $110.50 

Greater than $85,000 and less than or equal to 

$107,000.

Greater than $170,000 and less than or equal to 

$214,000.

44.20 154.70 

Greater than $107,000 and less than or equal to 

$160,000.

Greater than $214,000 and less than or equal to 

$320,000.

110.50 221.00 

Greater than $160,000 and less than or equal to 

$214,000.

Greater than $320,000 and less than or equal to 

$428,000.

176.80 287.30 

Greater than $214,000 ............................................. Greater than $428,000 ............................................. 243.10 353.60 

In addition, the monthly premium 

rates to be paid by beneficiaries who are 

married and lived with their spouse at 

any time during the taxable year, but file 

a separate tax return from their spouse, 

are also announced and listed below. 

Beneficiaries who are married and lived with their spouse at any time during the year, but file a separate 

tax return from their spouse: 

Income-related 

monthly adjustment amount 

Total monthly 

premium amount 

Less than or equal to $85,000 ........................................................................................................................ $0.00 $110.50 

Greater than $85,000 and less than or equal to $129,000 ............................................................................. 176.80 287.30 

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

The standard Part B premium rate of 

$110.50 is $14.10 higher than the 

premium for 2009, so there will be 

about $2 billion of additional costs in 

2010 to the approximately 12 million 

Part B enrollees who pay the increase in 

the Part B premium. Therefore, this 

notice is a major rule as defined in 5 

U.S.C. 804(2) and is an economically 

significant rule under Executive Order 

12866. 

In accordance with the provisions of 

Executive Order 12866, this notice was 

reviewed by the Office of Management 

and Budget. 


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Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Notices 54579 

IV. Waiver of Proposed Notice 

The statute requires publication of the 

monthly actuarial rates and the Part B 

premium amounts. We ordinarily use 

general notices, rather than notice and 

comment rulemaking procedures, to 

make such announcements. In doing so, 

we note that, under the Administrative 

Procedure Act, interpretive rules, 

general statements of policy, and rules 

of agency organization, procedure, or 

practice are excepted from the 

requirements of notice and comment 

rulemaking. 

We considered publishing a proposed 

notice to provide a period for public 

comment. However, we may waive that 

procedure if we find, for good cause, 

that prior notice and comment are 

impracticable, unnecessary, or contrary 

to the public interest. We find that the 

procedure for notice and comment is 

unnecessary because the formulas used 

to calculate the Part B premiums are 

statutorily directed, and we can exercise 

no discretion in applying those 

formulas. Moreover, the statute 

establishes the time period for which 

the premium rates will apply, and 

delaying publication of the Part B 

premium rate such that it would not be 

published before that time would be 

contrary to the public interest. 

Therefore, we find good cause to waive 

publication of a proposed notice and 

solicitation of public comments. 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: October 14, 2009. 

Charlene Frizzera, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: October 16, 2009. 

Kathleen Sebelius, 

Secretary. 

[FR Doc. E9–25370 Filed 10–16–09; 4:15 pm] 

BILLING CODE 4120–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

[CMS–8037–N] 

RIN 0938–AP42 

Medicare Program; Inpatient Hospital 

Deductible and Hospital and Extended 

Care Services Coinsurance Amounts 

for Calendar Year 2010 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Notice. 

SUMMARY: This notice announces the 

inpatient hospital deductible and the 

hospital and extended care services 

coinsurance amounts for services 

furnished in calendar year (CY) 2010 

under Medicare’s Hospital Insurance 

Program (Medicare Part A). The 

Medicare statute specifies the formulae 

used to determine these amounts. For 

CY 2010, the inpatient hospital 

deductible will be $1,100. The daily 

coinsurance amounts for CY 2010 will 

be—(a) $275 for the 61st through 90th 

day of hospitalization in a benefit 

period; (b) $550 for lifetime reserve 

days; and (c) $137.50 for the 21st 

through 100th day of extended care 

services in a skilled nursing facility in 

a benefit period. 

DATES: Effective Date: This notice is 

effective on January 1, 2010. 

FOR FURTHER INFORMATION CONTACT: 

Clare McFarland, (410) 786–6390 for 

general information. Gregory J. Savord, 

(410) 786–1521 for case-mix analysis. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Section 1813 of the Social Security 

Act (the Act) provides for an inpatient 

hospital deductible to be subtracted 

from the amount payable by Medicare 

for inpatient hospital services furnished 

to a beneficiary. It also provides for 

certain coinsurance amounts to be 

subtracted from the amounts payable by 

Medicare for inpatient hospital and 

extended care services. Section 

1813(b)(2) of the Act requires us to 

determine and publish each year the 

amount of the inpatient hospital 

deductible and the hospital and 

extended care services coinsurance 

amounts applicable for services 

furnished in the following CY. 

II. Computing the Inpatient Hospital 

Deductible for CY 2010 

Section 1813(b) of the Act prescribes 

the method for computing the amount of 

the inpatient hospital deductible. The 

inpatient hospital deductible is an 

amount equal to the inpatient hospital 

deductible for the preceding CY, 

adjusted by our best estimate of the 

payment-weighted average of the 

applicable percentage increases (as 

defined in section 1886(b)(3)(B) of the 

Act) used for updating the payment 

rates to hospitals for discharges in the 

fiscal year (FY) that begins on October 

1 of the same preceding CY, and 

adjusted to reflect changes in real casemix. The adjustment to reflect real casemix is determined on the basis of the 

most recent case-mix data available. The 

amount determined under this formula 

is rounded to the nearest multiple of $4 

(or, if midway between two multiples of 

$4, to the next higher multiple of $4). 

Under section 1886(b)(3)(B)(i)(XX) of 

the Act, the percentage increase used to 

update the payment rates for FY 2010 

for hospitals paid under the inpatient 

prospective payment system is the 

market basket percentage increase, 

otherwise known as the market basket 

update. Under section 1886(b)(3)(B)(viii) 

of the Act, hospitals will receive the full 

market basket update only if they 

submit quality data as specified by the 

Secretary. The market basket update for 

hospitals that do not submit this data is 

reduced by 2.0 percentage points. We 

are estimating that after accounting for 

those hospitals receiving the lower 

market basket update in the paymentweighted average update, the calculated 

deductible will remain the same. 

Under section 1886(b)(3)(B)(ii)(VIII) of 

the Act, the percentage increase used to 

update the payment rates for FY 2010 

for hospitals excluded from the 

prospective payment system is the 

market basket percentage increase, 

defined according to section 

1886(b)(3)(B)(iii) of the Act. 

The market basket percentage increase 

for 2010 is 2.1 percent, as announced in 

the final rule with comment period 

published in the Federal Register on 

August 27, 2009 entitled, ‘‘Medicare 

Program; Changes to the Hospital 

Inpatient Prospective Payment Systems 

for Acute Care Hospitals and Fiscal Year 

2010 Rates; and Changes to the LongTerm Care Hospital Prospective 

Payment System and Rate Years 2010 

and 2009 Rates (IPPS/RY 2010 LTCH 

PPS) (74 FR 43754).’’ Therefore, the 

percentage increase for hospitals paid 

under the prospective payment system 

is 2.1 percent. The average payment 

percentage increase for hospitals 

excluded from the prospective payment 

system is 2.5 percent. Weighting these 

percentages in accordance with 

payment volume, our best estimate of 

the payment-weighted average of the 

increases in the payment rates for FY 

2010 is 2.15 percent. 

To develop the adjustment to reflect 

changes in real case-mix, we first 

calculated for each hospital an average 

case-mix that reflects the relative 

costliness of that hospital’s mix of cases 

compared to those of other hospitals. 

We then computed the change in 

average case-mix for hospitals paid 

under the Medicare prospective 

payment system in FY 2009 compared 

to FY 2008. (We excluded from this 

calculation hospitals whose payments 

are not based on the Acute care 

prospective payment system because 

their payments are based on alternate 


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