[Federal Register Volume 71, Number 180 (Monday, September 18, 2006)]
[Notices]
[Pages 54665-54673]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-7709]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-8030-N]
RIN 0938-A023


Medicare Program; Medicare Part B Monthly Actuarial Rates, 
Premium Rates, and Annual Deductible for Calendar Year 2007

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, 2007. In addition, this notice announces the 
standard 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, as required by section 811 of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003, as 
modified by the Deficit Reduction Act of 2005. It also announces the 
annual deductible to be paid by all beneficiaries during 2007.
    The standard monthly Part B premium is equal to 50 percent of the 
monthly actuarial rate for aged enrollees or approximately 25 percent 
of the expected average total cost of Part B coverage for aged 
enrollees, plus any applicable income-related monthly adjustment 
amount. If a beneficiary has to pay an income-related monthly 
adjustment amount, they may have to pay a total monthly premium equal 
to 35, 50, 65, or 80 percent of the total cost of Part B coverage, by 
the end of the 3-year transition period. However, for 2007, the 
beneficiary is only responsible for one-third of any applicable income-
related monthly adjustment amount.
    The monthly actuarial rates for 2007 are $187.00 for aged enrollees 
and $197.30 for disabled enrollees. The monthly Part B premium rates to 
be paid in 2007, including the income-related monthly adjustment 
amounts, are $93.50 (the standard premium), $106.00, $124.70, $143.40, 
and $162.10. The specific amount payable by beneficiaries depends on 
their income level and income tax filing status. (The 2006 premium rate 
paid by all beneficiaries was $88.50.)
    The Part B deductible for 2007 is $131.00 for all beneficiaries.

[[Page 54666]]


DATES: Effective Date: January 1, 2007.

FOR FURTHER INFORMATION CONTACT: M. Kent Clemens, (410) 786-6391.

SUPPLEMENTARY INFORMATION: 

I. Background

    Part B is the voluntary portion of the Medicare program that pays 
all or part of the costs for physicians' services, outpatient hospital 
services, certain home health services, services furnished by rural 
health clinics, ambulatory surgical centers, comprehensive outpatient 
rehabilitation facilities, and certain other medical and health 
services not covered by Medicare Part A, Hospital Insurance. Medicare 
Part B is available to individuals who are entitled to Medicare Part A, 
as well as to U.S. residents who have attained age 65 and are citizens, 
and aliens who were lawfully admitted for permanent residence and have 
resided in the United States for 5 consecutive years. Part B requires 
enrollment and payment of monthly premiums, as provided for in 42 CFR 
part 407, subpart B, and part 408, respectively. The difference between 
the premiums paid by all enrollees and total incurred costs is met from 
the general revenues of the Federal Government.
    The Secretary of 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 in this notice 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 indexing 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 2007 
Part B deductible is calculated by multiplying the 2006 deductible by 
the ratio of the 2007 aged actuarial rate over the 2006 aged actuarial 
rate. The amount determined under this formula is then rounded to the 
nearest dollar.
    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 rates for 1991 through 1995 were legislated 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 standard premium be 
based on 50 percent of the monthly actuarial rate for aged enrollees 
(that is, 25 percent of program costs for aged enrollees).
    The BBA included a further provision affecting the calculation of 
the Part B actuarial rates and premiums for 1998 through 2003. Section 
4611 of the BBA modified the home health benefit payable under Part A 
for individuals enrolled in Part B. Under this section, beginning in 
1998, expenditures for home health services not considered ``post-
institutional'' are payable under Part B rather than Part A. However, 
section 4611(e)(1) of the BBA required that there be a transition from 
1998 through 2002 for the aggregate amount of the expenditures 
transferred from Part A to Part B. Section 4611(e)(2) of the BBA also 
provided a specific yearly proportion for the transferred funds. The 
proportions were \1/6\ for 1998, \1/3\ for 1999, \1/2\ for 2000, \2/3\ 
for 2001, and \5/6\ for 2002. For the purpose of determining the 
correct amount of financing from general revenues of the Federal 
Government, it was necessary to include only these transitional amounts 
in the monthly actuarial rates for both aged and disabled enrollees, 
rather than the total cost of the home health services being 
transferred.
    Section 4611(e)(3) of the BBA also specified, for the purpose of 
determining the premium, that the monthly actuarial rate for enrollees 
age 65 and over be computed as though the transition would occur for 
1998 through 2003 and that \1/7\ of the cost be transferred in 1998, 
\2/7\ in 1999, \3/7\ in 2000, \4/7\ in 2001, \5/7\ in 2002, and \6/7\ 
in 2003. Therefore, the transition period for incorporating this home 
health transfer into the premium was 7 years while the transition 
period for including these services in the actuarial rate was 6 years.
    Section 811 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (Pub. L. 108-173, also known as the Medicare 
Modernization Act, or MMA), which amended section 1839 of the Act, 
requires that, starting on January 1, 2007, the Part B premium a 
beneficiary pays each month be based on their annual income. 
Specifically, if a beneficiary's ``modified adjusted gross income'' is 
greater than the legislated threshold amounts (for 2007, $80,000 for a 
beneficiary filing an individual income tax return, and $160,000 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

[[Page 54667]]

beneficiaries will now have to pay an income-related monthly adjustment 
amount. The MMA made no change to the actuarial rate calculation, and 
the standard premium, which will continue to be paid by beneficiaries 
whose modified adjusted gross income is below the applicable 
thresholds, still represents 25 percent of the estimated total cost to 
the program of Part B coverage for an aged enrollee. However, once the 
adjustments are fully phased in, and depending on income and tax filing 
status, a beneficiary could now be responsible for 35, 50, 65, or 80 
percent of the estimated total cost of Part B coverage, rather than 25 
percent. The end result of the higher premium is that the Part B 
premium subsidy is reduced and less general revenue financing is 
required for beneficiaries with higher income because they are paying a 
larger share of the total cost with their premium. That is, the premium 
subsidy will continue to be approximately 75 percent for beneficiaries 
with income below the applicable income thresholds, but will be reduced 
for beneficiaries with income above these thresholds. The MMA specified 
that there be a 5-year transition to full implementation of this 
provision. However, the Deficit Reduction Act of 2005 (Pub. L. 109-171) 
(DRA) modified the transition to a 3-year period.
    Section 4732(c) of the BBA added section 1933(c) of the Act, which 
required the Secretary to allocate money from the Part B trust fund to 
the State Medicaid programs for the purpose of providing Medicare Part 
B premium assistance from 1998 through 2002 for the low-income Medicaid 
beneficiaries who qualify under section 1933 of the Act. This 
allocation, while not a benefit expenditure, was an expenditure of the 
trust fund and was included in calculating the Part B actuarial rates 
through 2002. For 2003, 2004, 2005, and 2006, the expenditure was made 
from the trust fund because the allocation was temporarily extended. 
However, because the extension occurred after the Part B financing was 
determined, the allocation was not included in the calculation of the 
financing rates. For 2007, the allocation has been temporarily extended 
and is included in the calculation of the financing rates.
    A further provision affecting the calculation of the Part B premium 
is section 1839(f) of the Act, as amended by section 211 of the 
Medicare Catastrophic Coverage Act of 1988 (MCCA 88) (Pub. L. 100-360). 
(The Medicare Catastrophic Coverage Repeal Act of 1989 (Pub. L. 101-
234) did not repeal the revisions to section 1839(f) made by MCCA 88.) 
Section 1839(f) of the Act referred to as the ``hold-harmless'' 
provision, provides that if an individual is entitled to benefits under 
section 202 or 223 of the Act (the Old-Age and Survivors Insurance 
Benefit and the Disability Insurance Benefit, respectively) and has the 
Part B premiums deducted from these benefit payments, the premium 
increase will be reduced, if necessary, to avoid causing a decrease in 
the individual's net monthly payment. This decrease in payment occurs 
if the increase in the individual's social security benefit due to the 
cost-of-living adjustment under section 215(i) of the Act is less than 
the increase in the premium. Specifically, the reduction in the premium 
amount applies if the individual is entitled to benefits under section 
202 or 223 of the Act for November and December of a particular year 
and the individual's Part B premiums for December and the following 
January are deducted from the 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.
     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 This 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 2007 are 
$187.00 for enrollees age 65 and over and $197.30 for disabled 
enrollees under age 65. Section II.B. of this notice, presents the 
actuarial assumptions and bases from which these rates are derived. 
Listed below are the 2007 Part B monthly premium rates to be paid by 
beneficiaries who file an individual tax return (including those who 
are single, head of household, qualifying widow(er) with dependent 
child, or married filing separately who lived apart from their spouse 
for the entire taxable year), or a joint tax return.

----------------------------------------------------------------------------------------------------------------
                                                                                  Income-related
   Beneficiaries who file an individual tax      Beneficiaries who file a joint       monthly      Total monthly
              return with income                     tax return with income         adjustment    premium amount
                                                                                      amount
----------------------------------------------------------------------------------------------------------------
Less than or equal to $80,000.................  Less than or equal to $160,000..           $0.00          $93.50
Greater than $80,000 and less than or equal to  Greater than $160,000 and less             12.50          106.00
 $100,000.                                       than or equal to $200,000.
Greater than $100,000 and less than or equal    Grater than $200,000 and less              31.20          124.70
 to $150,000.                                    than or equal to $300,00.

[[Page 54668]]

 
Greater than $150,000 and less than or equal    Greater than $300,000 and less             49.90          143.40
 to $200,000.                                    than or equal to $400,000.
Greater than $200,000.........................  Greater than $400,000...........           68.60          162.10
----------------------------------------------------------------------------------------------------------------

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

------------------------------------------------------------------------
 Beneficiaries who are married and lived  Income-related
with their spouse at any time during the      monthly      Total monthly
  year, but file a separate tax return      adjustment    premium amount
            from their spouse                 amount
------------------------------------------------------------------------
Less than or equal to $80,000...........           $0.00          $93.50
Greater than $80,000 and less than or              49.90          143.40
 equal to $120,000......................
Greater than $120,000...................           68.60          162.10
------------------------------------------------------------------------

    The Part B annual deductible for 2007 is $131.00 for all 
beneficiaries.

B. Statement of Actuarial Assumptions and Bases Employed in Determining 
the Monthly Actuarial Rates and the Monthly Premium Rates for Part B 
Beginning January 2007

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 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 2005 and 2006.

 Table 1.--Estimated Actuarial Status of the Part B Account in the Supplemental 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, 2005...................................................         $24,008         $10,386         $13,622
Dec. 31, 2006...................................................          29,605           7,498          22,107
----------------------------------------------------------------------------------------------------------------

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.
    The monthly actuarial rate for enrollees age 65 and older for 2007 
is determined by first establishing per-enrollee cost by type of 
service from program data through 2005 and then projecting these costs 
for subsequent years. The projection factors used for financing periods 
from January 1, 2004 through December 31, 2007 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 2007 is $177.83. The monthly actuarial 
rate of $187.00 also provides an adjustment of -$1.86 for interest 
earnings and $11.03 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

[[Page 54669]]

(Pub. L. 108-7) in February 2003, the MMA in December 2003, and the DRA 
in February 2006. Each of these three legislative packages was enacted 
after the establishment of the Part B premium (for 2003, 2004, and 
2006, 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. Therefore, the remaining level of assets is inadequate for 
contingency purposes.
    The contingency margin included in establishing the 2006 actuarial 
rate and beneficiary premiums was intended to achieve significant 
progress towards restoring the assets to an adequate level. As noted 
previously, the subsequent enactment of the DRA increased Part B 
expenditures and thereby limited the growth in Part B account assets, 
with the result that the intended progress was not achieved. 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 2007 are 
set to increase the asset level in the Part B account to the fully 
adequate level at the end of 2007 under current law (that is, in the 
absence of further legislation).
3. Monthly Actuarial Rate for Disabled Enrollees
    Disabled enrollees are those persons under age 65 who are enrolled 
in Part B because of entitlement to social security disability benefits 
for more than 24 months or because of entitlement to Medicare under the 
end-stage renal disease (ESRD) program. Projected monthly costs for 
disabled enrollees (other than those with ESRD) are prepared in a 
fashion parallel to the projection for the aged using appropriate 
actuarial assumptions (see Table 2). Costs for the ESRD program are 
projected differently because of the different nature of services 
offered by the program.
    As shown in Table 4, the projected monthly rate required to pay for 
one-half of the total of benefits and administrative costs for disabled 
enrollees for 2007 is $201.12. The monthly actuarial rate of $197.30 
also provides an adjustment of -$3.92 for interest earnings and $0.10 
for a contingency margin. Based on current estimates, the assets 
associated with the disabled Medicare beneficiaries are sufficient to 
cover the amount of incurred, but unpaid, expenses and to provide for a 
moderate degree of variation between actual and projected costs. Thus, 
a minimal contingency margin is needed to maintain assets at an 
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 program cost 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 $32,807 million by the end of December 2007. 
This amounts to 17.3 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 $13,579 million by 
the end of December 2007, which amounts to 6.4 percent of the estimated 
total incurred expenditures for the following year. Under fairly 
optimistic assumptions, the monthly actuarial rates would result in a 
surplus of $43,867 million by the end of December 2007, or 26.2 percent 
of the estimated total incurred expenditures for the following year.
    The above analysis indicates that the premium and general revenue 
financing established for 2007, together with existing Part B account 
assets, would be adequate to cover estimated Part B costs for 2007 
under current law, even if actual costs prove to be somewhat greater 
than expected.
5. Premium Rates and Deductible
    As determined pursuant to section 1839 of the Act, listed below are 
the 2007 Part B monthly premium rates to be paid by beneficiaries who 
file an individual tax return (including those who are single, head of 
household, qualifying widow(er) with dependent child, or married filing 
separately who lived apart from their spouse for the entire taxable 
year), or a joint tax return.

----------------------------------------------------------------------------------------------------------------
                                                                                  Income-related
   Beneficiaries who file an individual tax      Beneficiaries who file a joint       monthly      Total monthly
              return with income                     tax return with income         adjustment    premium amount
                                                                                      amount
----------------------------------------------------------------------------------------------------------------
Less than or equal to $80,000.................  Less than or equal to $160,000..           $0.00          $93.50
Greater than $80,000 and less than or equal to  Greater than $160,000 and less             12.50          106.00
 $100,000.                                       than or equal to $200,000.
Greater than $100,000 and less than or equal    Greater than $200,000 and less             31.20          124.70
 to $150,000.                                    than or equal to $300,000.
Greater than $150,000 and less than or equal    Greater than $300,000 and less             49.90          143.40
 to $200,000.                                    than or equal to $400,000.
Greater than $200,000.........................  Greater than $400,000...........           68.60          162.10
----------------------------------------------------------------------------------------------------------------

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

------------------------------------------------------------------------
 Beneficiaries who are married and lived  Income-related
with their spouse at any time during the      monthly      Total monthly
  year, but file a separate tax return      adjustment    premium amount
            from their spouse                 amount
------------------------------------------------------------------------
Less than or equal to $80,000...........           $0.00          $93.50
Greater than $80,000 and less than or              49.90          143.40
 equal to $120,000......................

[[Page 54670]]

 
Greater than $120,000...................           68.60          162.10
------------------------------------------------------------------------

    Also, as specified by section 1833(b) of the Act, the annual 
deductible for 2007 is $131.00 for all beneficiaries.

                                     Table 2.--Projecton Factors \1\ 12-Month Period Ending December 31 of 2004-2007
                                                                      [In percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                Physician's services                             Other
                               ----------------------   Durable     Carrier     carrier     Outpatient     Home     Hospital        Other       Managed
         Calendar year            Fees     Residual     medical     lab \4\     services     hospital     health     lab \6\    intermediary      care
                                  \2\        \3\       equipment                  \5\                     agency                services \7\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Aged:
    2004......................      3.8          6.0         -0.4        7.7          7.7          11.1      14.6         7.4            15.5       11.4
    2005......................      2.1          3.7          1.4        7.0          3.8           8.7      10.3         6.1            14.7        9.7
    2006......................      0.2          5.8          7.4        7.8         10.7          12.5       8.0        14.0            13.2       10.1
    2007......................     -7.2          7.5          3.7        5.9         12.8          10.1       8.1         4.0            -2.6        0.8
Disabled:
    2004......................      3.8          5.9          0.4        9.3         14.0          12.3      14.8         9.5             2.1       16.0
    2005......................      2.1          3.9          3.2        7.9         10.0           9.4       9.6         5.9            10.1        3.4
    2006......................      0.2          3.8          7.3        6.3          2.2          11.2       8.1        12.3            13.2        7.8
    2007......................     -7.2          7.4          3.6        5.7         11.3           9.9       8.4         3.8            -3.4       3.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
\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 Montly Actuarial Rate for Enrollees Age 65 and
Over for Financing Periods Ending December 31, 2004 Through December 31,
                                  2007
------------------------------------------------------------------------
                                           Financing periods
                             -------------------------------------------
                               CY 2004    CY 2005    CY 2006    CY 2007
------------------------------------------------------------------------
Covered services (at level
 recognized):
    Physician fee schedule..     $76.19     $79.78     $81.55     $79.18
    Durable medical                9.65       9.67      10.02      10.12
     equipment..............
    Carrier lab \1\.........       3.44       3.64       3.79       3.91
    Other carrier services        18.96      19.46      20.77      22.81
     \2\....................
    Outpatient hospital.....      26.60      28.58      31.03      33.26
    Home health.............       6.66       7.26       7.56       7.96
    Hospital lab \3\........       2.69       2.83       3.11       3.15
    Other intermediary            10.98      12.45      13.59      12.88
     services \4\...........
    Managed care............      22.39      26.16      34.15      38.32
                             -------------------------------------------
        Total services......     177.56     189.82     205.57     211.59
Cost-sharing:
    Deductible..............      -4.07      -4.47      -5.05      -5.33
    Coinsurance.............     -30.83     -31.97     -32.68     -32.32
                             -------------------------------------------
        Total benefits......     142.65     153.38     167.85     173.93
Administrative expenses.....       3.06       3.39       3.48       3.90
                             -------------------------------------------
    Incurred expenditures...     145.72     156.77     171.33     177.83
Value of interest...........      -1.63      -1.28      -1.30      -1.86
Contingency margin for           -10.88       0.91       6.87      11.03
 projection error and to
 amortize the surplus or
 deficit....................
                             ===========================================
    Monthly actuarial rate..     133.20     156.40     176.90    187.00
------------------------------------------------------------------------
\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, rehabilitation and
  psychiatric hospitals, etc.


[[Page 54671]]


  Table 4.--Derivation of Monthly Actuarial Rate for Disabled Enrollees
  Financing Periods Ending December 31, 2004 through December 31, 2007
------------------------------------------------------------------------
                                           Financing periods
                             -------------------------------------------
                               CY 2004    CY 2005    CY 2006    CY 2007
------------------------------------------------------------------------
Covered services (at level
 recognized):
    Physician fee schedule..     $77.90     $82.21     $84.21     $82.95
    Durable medical               16.41      16.90      17.87      18.29
     equipment..............
    Carrier lab \1\.........       4.17       4.47       4.69       4.90
    Other carrier services        22.66      24.87      25.26      27.81
     \2\....................
    Outpatient hospital.....      35.79      38.74      42.57      46.22
    Home health.............       5.40       5.88       6.25       6.70
    Hospital lab \3\........       4.10       4.30       4.76       4.88
    Other intermediary            37.40      39.75      43.99      41.65
     services \4\...........
    Managed care............      11.09      12.56      16.38      19.05
                             -------------------------------------------
        Total services......     214.92     229.69     245.98     252.44
Cost-sharing:
    Deductible..............      -3.79      -4.15      -4.71      -4.98
    Coinsurance.............     -44.22     -46.39     -48.23     -50.13
                             -------------------------------------------
        Total benefits......     166.91     179.14     193.03     197.34
Administrative expenses.....   \5\ 9.16       3.83       3.76       3.78
                             -------------------------------------------
    Incurred expenditures...     176.07     182.98     196.79     201.12
    Value of interest.......      -1.37      -2.35      -2.86      -3.92
Contingency margin for             0.80      11.18       9.77       0.10
 projection error and to
 amortize the surplus or
 deficit....................
                             ===========================================
    Monthly actuarial rate..     175.50     191.80     203.70    197.30
------------------------------------------------------------------------
\1\ Includes services paid under the lab fee schedule furnished in the
  physician's office or an independent lab.
\2\ Includes physician-administered drugs, ambulatory surgical center
  facility costs, ambulance services, parenteral and enteral drug costs,
  supplies, etc.
\3\ Includes services paid under the lab fee schedule furnished in the
  outpatient department of a hospital.
\4\ Includes services furnished in dialysis facilities, rural health
  clinics, federally qualified health centers, rehabilitation and
  psychiatric hospitals, etc.
\5\ 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, 2007
------------------------------------------------------------------------
          As of December 31              2005        2006        2007
------------------------------------------------------------------------
This projection:
    Actuarial status (in millions):
        Assets......................   $24,008     $29,605     $39,921
        Liabilities.................    10,386       7,498       7,114
                                     -----------------------------------
            Assets less liabilities.    13,622      22,107      32,807
        Ratio (in percent) \1\......         8.1        12.5        17.3
Low cost projection:
    Actuarial status (in millions):
        Assets......................    24,008      29,605      50,192
        Liabilities.................    10,386       6,684       6,325
                                     -----------------------------------
            Assets less liabilities.    13,622      22,921      43,867
        Ratio (in percent) \1\......         8.5        14.2        26.2
High cost projection:
    Actuarial status (in millions):
        Assets......................    24,008      29,605      21,464
        Liabilities.................    10,386       8,270       7,885
                                     -----------------------------------
            Assets less liabilities.    13,622      21,336      13,579
        Ratio (in percent) \1\......         7.7        11.1         6.4 
------------------------------------------------------------------------
\1\ Ratio of assets less liabilities at the end of the year to the total
  incurred expenditures during the following year, expressed as a
  percent.

III. Regulatory Impact Analysis

    We have examined the impact of this notice under the 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

[[Page 54672]]

effects, distributive impacts, and equity).
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
$6 million to $29 million in any 1-year.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds. We have determined that 
this notice will not have a significant effect on a substantial number 
of small entities or on the operations of a substantial number of small 
rural hospitals. Therefore, we are not preparing analyses for either 
the RFA or section 1102(b) of the Act.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires that agencies assess anticipated costs and benefits before 
issuing any proposed or final rule that contains mandates that may 
result in the expenditure in any one year by State, local, and tribal 
governments, or by the private sector, of $100 million in 1995 dollars. 
This notice contains no mandates for expenditures by State, local, or 
tribal governments or the private sector. Accordingly, it does not 
trigger the threshold set under UMRA.
    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 2007 are $187.00 for enrollees age 65 and over and $197.30 for 
disabled enrollees under age 65. It also announces the 2007 monthly 
Part B premium rates to be paid by beneficiaries who file an individual 
tax return (including those who are single, head of household, 
qualifying widow(er) with a dependent child, or married filing 
separately who lived apart from their spouse for the entire taxable 
year), or a joint tax return.

----------------------------------------------------------------------------------------------------------------
                                                                                  Income-related
   Beneficiaries who file an individual tax      Beneficiaries who file a joint       monthly      Total monthly
              return with income                     tax return with income         adjustment    premium amount
                                                                                      amount
----------------------------------------------------------------------------------------------------------------
Less than or equal to $80,000.................  Less than or equal to $160,000..           $0.00          $93.50
Greater than $80,000 and less than or equal to  Greater than $160,000 and less             12.50          106.00
 $100,000.                                       than or equal to $200,000.
Greater than $100,000 and less than or equal    Greater than $200,000 and less             31.20          124.70
 to $150,000.                                    than or equal to $300,000.
Greater than $150,000 and less than or equal    Greater than $300,000 and less             49.90          143.40
 to $200,000.                                    than or equal to $400,000.
Greater than $200,000.........................  Greater than $400,000...........           68.60          162.10
----------------------------------------------------------------------------------------------------------------

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

------------------------------------------------------------------------
 Beneficiaries who are married and lived  Income-related
with their spouse at any time during the      monthly      Total monthly
  year, but file a separate tax return      adjustment    premium amount
            from their spouse                 amount
------------------------------------------------------------------------
Less than or equal to $80,000...........           $0.00          $93.50
Greater than $80,000 and less than or              49.90          143.40
 equal to $120,000......................
Greater than $120,000...................           68.60          162.10
------------------------------------------------------------------------

    The Part B deductible for calendar year 2007 is $131.00. The 
standard Part B premium rate of $93.50 is 5.6 percent higher than the 
$88.50 premium rate for 2006. We estimate that this increase will cost 
approximately 41 million Part B enrollees about $2.5 billion for 2007. 
The monthly impact on the beneficiaries who are required to pay a 
higher premium for 2007 because their incomes exceed specified 
thresholds is $12.50, $31.20, $49.90, or $68.60, which is in addition 
to the standard monthly premium. Therefore, this notice is a major rule 
as defined in Title 5, United States Code, section 804(2) and is an 
economically significant rule under Executive Order 12866.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

IV. Waiver of Proposed Notice and Comment

    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 and the income-related monthly 
adjustment amounts are statutorily directed and we can exercise no 
discretion in applying

[[Page 54673]]

those formulas. Moreover, the statute establishes the time period for 
which the premium rates will apply, and delaying publication of the 
Part B premium rate such that it would not be published before that 
time would be contrary to the public interest. Therefore, we find good 
cause to waive publication of a proposed notice and solicitation of 
public comments.

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

    Dated: September 11, 2006.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.

    Approved: September 12, 2006.
Michael O. Leavitt,
Secretary.
[FR Doc. 06-7709 Filed 9-12-06; 4:00 pm]
BILLING CODE 4120-01-P