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


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-8039-N]
RIN 0938-AP48


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

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Notice.

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SUMMARY: This notice announces the monthly actuarial rates for aged 
(age 65 and over) and disabled (under age 65) beneficiaries enrolled in 
Part B of the Medicare Supplementary Medical Insurance (SMI) program 
beginning January 1, 2010. In addition, this notice announces the 
monthly premium for aged and disabled beneficiaries as well as the 
income-related monthly adjustment amounts to be paid by beneficiaries 
with modified adjusted gross income above certain threshold amounts. 
The monthly actuarial rates for 2010 are $221.00 for aged enrollees and 
$270.40 for disabled enrollees. The standard monthly Part B premium 
rate for 2010 is $110.50, which is equal to 50 percent of the monthly 
actuarial rate for aged enrollees or roughly 25 percent of the expected 
average total cost of Part B coverage for aged enrollees. (The 2009 
standard premium rate was $96.40.) The Part B deductible for 2010 is 
$155.00 for all Part B beneficiaries. A beneficiary who has to pay an 
income-related monthly adjustment may have to pay a total monthly 
premium of roughly 35, 50, 65 or 80 percent of the total cost of Part B 
coverage.

DATES: Effective Date: January 1, 2010.

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

SUPPLEMENTARY INFORMATION:

I. Background

    Part B is the voluntary portion of the Medicare program that pays 
all or part of the costs for physicians' services, outpatient hospital 
services, certain home health services, services furnished by rural 
health clinics, ambulatory surgical centers, comprehensive outpatient 
rehabilitation facilities, and certain other medical and health 
services not covered by Medicare Part A, Hospital Insurance. Medicare 
Part B is available to individuals who are entitled to Medicare Part A, 
as well as to U.S. residents who have attained age 65 and are citizens, 
and aliens who were lawfully admitted for permanent residence and have 
resided in the United States for 5 consecutive years. Part B requires 
enrollment and payment of monthly premiums, as provided for in 42 CFR 
part 407, subpart B, and part 408, respectively. Part B costs are met 
by payments from the Part B account of the Supplementary Medical 
Insurance Trust Fund, which is funded by the premiums paid by all 
enrollees and general revenues of the Federal Government.
    The Secretary of the Department of Health and Human Services (the 
Secretary) is required by section 1839 of the Social Security Act (the 
Act) to announce the Part B monthly actuarial rates for aged and 
disabled beneficiaries as well as the monthly Part B premium. The Part 
B annual deductible is included because its determination is directly 
linked to the aged actuarial rate.
    The monthly actuarial rates for aged and disabled enrollees are 
used to determine the correct amount of general revenue financing per 
beneficiary each month. These rates, according to actuarial estimates, 
will initially equal, respectively, one-half the expected average 
monthly cost of Part B for each aged enrollee (age 65 or over) and one-
half the expected average monthly cost of Part B for each disabled 
enrollee (under age 65). The actuarial rates are then adjusted to 
include any margin necessary to maintain an adequate contingency 
reserve in the Part B account of the Supplementary Medical Insurance 
Trust Fund.
    The Part B deductible to be paid by enrollees is also announced. 
Prior to the

[[Page 54572]]

Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(MMA) (Pub. L. 108-173), the Part B deductible was set in statute. 
After setting the 2005 deductible amount at $110.00, section 629 of the 
MMA (amending section 1833(b) of the Act) requires that the Part B 
deductible be indexed beginning in 2006. The inflation factor to be 
used each year is the annual percentage increase in the Part B 
actuarial rate for enrollees age 65 and over. Specifically, the 2010 
Part B deductible is calculated by multiplying the 2009 deductible by 
the ratio of the 2010 aged actuarial rate over the 2009 aged actuarial 
rate. The amount determined under this formula is then rounded to the 
nearest $1.
    The monthly Part B premium rate to be paid by aged and disabled 
enrollees is also announced. (Although the costs to the program per 
disabled enrollee are different than for the aged, the statute provides 
that they pay the same premium amount.) Beginning with the passage of 
section 203 of the Social Security Amendments of 1972 (Pub. L. 92-603), 
the premium rate, which was determined on a fiscal year basis, was 
limited to the lesser of the actuarial rate for aged enrollees, or the 
current monthly premium rate increased by the same percentage as the 
most recent general increase in monthly Title II Social Security 
benefits.
    However, the passage of section 124 of the Tax Equity and Fiscal 
Responsibility Act of 1982 (TEFRA) (Pub. L. 97-248) suspended this 
premium determination process. Section 124 of TEFRA changed the premium 
basis to 50 percent of the monthly actuarial rate for aged enrollees 
(that is, 25 percent of program costs for aged enrollees). Section 606 
of the Social Security Amendments of 1983 (Pub. L. 98-21), section 2302 
of the Deficit Reduction Act of 1984 (DEFRA 84) (Pub. L. 98-369), 
section 9313 of the Consolidated Omnibus Budget Reconciliation Act of 
1985 (COBRA 85) (Pub. L. 99-272), section 4080 of the Omnibus Budget 
Reconciliation Act of 1987 (OBRA 87) (Pub. L. 100-203), and section 
6301 of the Omnibus Budget Reconciliation Act of 1989 (OBRA 89) (Pub. 
L. 101-239) extended the provision that the premium be based on 50 
percent of the monthly actuarial rate for aged enrollees (that is, 25 
percent of program costs for aged enrollees). This extension expired at 
the end of 1990.
    The premium rate for 1991 through 1995 was legislated by section 
1839(e)(1)(B) of the Act, as added by section 4301 of the Omnibus 
Budget Reconciliation Act of 1990 (OBRA 90) (Pub. L. 101-508). In 
January 1996, the premium determination basis would have reverted to 
the method established by the 1972 Social Security Act Amendments. 
However, section 13571 of the Omnibus Budget Reconciliation Act of 1993 
(OBRA 93) (Pub. L. 103-66) changed the premium basis to 50 percent of 
the monthly actuarial rate for aged enrollees (that is, 25 percent of 
program costs for aged enrollees) for 1996 through 1998.
    Section 4571 of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-
33) permanently extended the provision that the premium be based on 50 
percent of the monthly actuarial rate for aged enrollees (that is, 25 
percent of program costs for aged enrollees).
    The BBA included a further provision affecting the calculation of 
the Part B actuarial rates and premiums for 1998 through 2003. Section 
4611 of the BBA modified the home health benefit payable under Part A 
for individuals enrolled in Part B. Under this section, beginning in 
1998, expenditures for home health services not considered ``post-
institutional'' are payable under Part B rather than Part A. However, 
section 4611(e)(1) of the BBA required that there be a transition from 
1998 through 2002 for the aggregate amount of the expenditures 
transferred from Part A to Part B. Section 4611(e)(2) of the BBA also 
provided a specific yearly proportion for the transferred funds. The 
proportions were \1/6\ for 1998, \1/3\ for 1999, \1/2\ for 2000, \2/3\ 
for 2001, and \5/6\ for 2002. For the purpose of determining the 
correct amount of financing from general revenues of the Federal 
Government, it was necessary to include only these transitional amounts 
in the monthly actuarial rates for both aged and disabled enrollees, 
rather than the total cost of the home health services being 
transferred.
    Section 4611(e)(3) of the BBA also specified, for the purpose of 
determining the premium, that the monthly actuarial rate for enrollees 
age 65 and over be computed as though the transition would occur for 
1998 through 2003 and that \1/7\ of the cost be transferred in 1998, 
\2/7\ in 1999, \3/7\ in 2000, \4/7\ in 2001, \5/7\ in 2002, and \6/7\ 
in 2003. Therefore, the transition period for incorporating this home 
health transfer into the premium was 7 years while the transition 
period for including these services in the actuarial rate was 6 years.
    Section 811 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (Pub. L. 108-173), also known as the Medicare 
Modernization Act, or MMA), which amended section 1839 of the Act, 
requires that, starting on January 1, 2007, the Part B premium a 
beneficiary pays each month be based on his or her annual income. 
Specifically, if a beneficiary's ``modified adjusted gross income'' is 
greater than the legislated threshold amounts (for 2010, $85,000 for a 
beneficiary filing an individual income tax return, and $170,000 for a 
beneficiary filing a joint tax return) the beneficiary is responsible 
for a larger portion of the estimated total cost of Part B benefit 
coverage. In addition to the standard 25 percent premium, these 
beneficiaries have to pay an income-related monthly adjustment amount. 
The MMA made no change to the actuarial rate calculation, and the 
standard premium, which will continue to be paid by beneficiaries whose 
modified adjusted gross income is below the applicable thresholds, 
still represents approximately 25 percent of the estimated total cost 
to the program of Part B coverage for an aged enrollee. However, 
depending on income and tax filing status, a beneficiary could be 
responsible for 35, 50, 65 or 80 percent of the estimated total cost of 
Part B coverage, rather than 25 percent. The end result of the higher 
premium is that the Part B premium subsidy is reduced and less general 
revenue financing is required for beneficiaries with higher income 
because they are paying a larger share of the total cost with their 
premium. That is, the premium subsidy will continue to be approximately 
75 percent for beneficiaries with income below the applicable income 
thresholds, but will be reduced for beneficiaries with income above 
these thresholds. The MMA specified that there be a 5-year transition 
to full implementation of this provision. However, section 5111 of the 
Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171) modified the 
transition to a 3-year period. The full reduction in the Part B premium 
subsidy for beneficiaries with incomes above the applicable thresholds 
is in effect for calendar years 2009 and later.
    Section 4732(c) of the BBA added section 1933(c) of the Act, which 
required the Secretary to allocate money from the Part B trust fund to 
the State Medicaid programs for the purpose of providing Medicare Part 
B premium assistance from 1998 through 2002 for the low-income Medicaid 
beneficiaries who qualify under section 1933 of the Act. This 
allocation, while not a benefit expenditure, was an expenditure of the 
trust fund and was included in calculating the Part B actuarial rates 
through 2002. For 2003 through 2010, the allocation was temporarily 
extended.
    A further provision affecting the calculation of the Part B premium 
is

[[Page 54573]]

section 1839(f) of the Act, as amended by section 211 of the Medicare 
Catastrophic Coverage Act of 1988 (MCCA 88) (Pub. L. 100-360). (The 
Medicare Catastrophic Coverage Repeal Act of 1989 (Pub. L. 101-234) did 
not repeal the revisions to section 1839(f) made by MCCA 88.) Section 
1839(f) of the Act, referred to as the ``hold-harmless'' provision, 
provides that if an individual is entitled to benefits under section 
202 or 223 of the Act (the Old-Age and Survivors Insurance Benefit and 
the Disability Insurance Benefit, respectively) and has the Part B 
premiums deducted from these benefit payments, the premium increase 
will be reduced, if necessary, to avoid causing a decrease in the 
individual's net monthly payment. This decrease in payment occurs if 
the increase in the individual's social security benefit due to the 
cost-of-living adjustment under section 215(i) of the Act is less than 
the increase in the premium. Specifically, the reduction in the premium 
amount applies if the individual is entitled to benefits under section 
202 or 223 of the Act for November and December of a particular year 
and the individual's Part B premiums for December and the following 
January are deducted from the respective month's section 202 or 223 
benefits. The ``hold-harmless'' provision does not apply to 
beneficiaries who are required to pay an income-related monthly 
adjustment amount.
    A check for benefits under section 202 or 223 of the Act is 
received in the month following the month for which the benefits are 
due. The Part B premium that is deducted from a particular check is the 
Part B payment for the month in which the check is received. Therefore, 
a benefit check for November is not received until December, but has 
December's Part B premium deducted from it.
    Generally, if a beneficiary qualifies for hold-harmless protection, 
that is, if the beneficiary was in current payment status for November 
and December of the previous year, the reduced premium for the 
individual for that January and for each of the succeeding 11 months 
for which he or she is entitled to benefits, under section 202 or 203 
of the Act, is the greater of the following--
     The monthly premium for January reduced as necessary to 
make the December monthly benefits, after the deduction of the Part B 
premium for January, at least equal to the preceding November's monthly 
benefits, after the deduction of the Part B premium for December; or
     The monthly premium for that individual for that December.
    In determining the premium limitations under section 1839(f) of the 
Act, the monthly benefits to which an individual is entitled under 
section 202 or 223 of the Act do not include retroactive adjustments or 
payments and deductions on account of work. Also, once the monthly 
premium amount is established under section 1839(f) of the Act, it will 
not be changed during the year even if there are retroactive 
adjustments or payments and deductions on account of work that apply to 
the individual's monthly benefits.
    Individuals who have enrolled in Part B late or who have re-
enrolled after the termination of a coverage period are subject to an 
increased premium under section 1839(b) of the Act. The increase is a 
percentage of the premium and is based on the new premium rate before 
any reductions under section 1839(f) of the Act are made.

II. Provisions of the Notice

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

    The Medicare Part B monthly actuarial rates applicable for 2010 are 
$221.00 for enrollees age 65 and over and $270.40 for disabled 
enrollees under age 65. Section II.B. of this notice below, presents 
the actuarial assumptions and bases from which these rates are derived. 
The Part B standard monthly premium rate for 2010 is $110.50. The Part 
B annual deductible for 2010 is $155.00. Listed below are the 2010 Part 
B monthly premium rates to be paid by beneficiaries who file an 
individual tax return (including those who are single, head of 
household, qualifying widow(er) with dependent child, or married filing 
separately who lived apart from their spouse for the entire taxable 
year), or a joint tax return. (The income thresholds are indexed to the 
Consumer Price Index and rounded to the nearest $1,000.)

----------------------------------------------------------------------------------------------------------------
                                                                               Income-related
  Beneficiaries who file an individual tax    Beneficiaries who file a joint       monthly        Total monthly
             return with income:                  tax return with income:        adjustment      premium amount
                                                                                   amount
----------------------------------------------------------------------------------------------------------------
Less than or equal to $85,000...............  Less than or equal to $170,000             $0.00           $110.50
Greater than $85,000 and less than or equal   Greater than $170,000 and less             44.20            154.70
 to $107,000.                                  than or equal to $214,000.
Greater than $107,000 and less than or equal  Greater than $214,000 and less            110.50            221.00
 to $160,000.                                  than or equal to $320,000.
Greater than $160,000 and less than or equal  Greater than $320,000 and less            176.80            287.30
 to $214,000.                                  than or equal to $428,000.
Greater than $214,000.......................  Greater than $428,000.........            243.10            353.60
----------------------------------------------------------------------------------------------------------------

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

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


[[Page 54574]]

    The Part B annual deductible for 2010 is $155.00 for all 
beneficiaries.

B. Statement of Actuarial Assumptions and Bases Employed in Determining 
the Monthly Actuarial Rates and the Monthly Premium Rate for Part B 
Beginning January 2010

1. Actuarial Status of the Part B Account in the Supplementary Medical 
Insurance Trust Fund
    Under the statute, the starting point for determining the standard 
monthly premium is the amount that would be necessary to finance Part B 
on an incurred basis. This is the amount of income that would be 
sufficient to pay for services furnished during that year (including 
associated administrative costs) even though payment for some of these 
services will not be made until after the close of the year. The 
portion of income required to cover benefits not paid until after the 
close of the year is added to the trust fund and used when needed.
    The premium rates are established prospectively and are, therefore, 
subject to projection error. Additionally, legislation enacted after 
the financing was established, but effective for the period in which 
the financing is set, may affect program costs. As a result, the income 
to the program may not equal incurred costs. Therefore, trust fund 
assets must be maintained at a level that is adequate to cover an 
appropriate degree of variation between actual and projected costs, and 
the amount of incurred, but unpaid, expenses. Numerous factors 
determine what level of assets is appropriate to cover variation 
between actual and projected costs. The three most important of these 
factors are: (1) The difference from prior years between the actual 
performance of the program and estimates made at the time financing was 
established; (2) the likelihood and potential magnitude of expenditure 
changes resulting from enactment of legislation affecting Part B costs 
in a year subsequent to the establishment of financing for that year, 
and (3) the expected relationship between incurred and cash 
expenditures. These factors are analyzed on an ongoing basis, as the 
trends can vary over time.
    Table 1 summarizes the estimated actuarial status of the trust fund 
as of the end of the financing period for 2008 and 2009.

 Table 1--Estimated Actuarial Status of the Part B Account in the Supplementary Medical Insurance Trust Fund as
                                       of the End of the Financing Period
----------------------------------------------------------------------------------------------------------------
                                                                                                    Assets less
                     Financing period ending                          Assets        Liabilities     liabilities
                                                                    (millions)      (millions)      (millions)
----------------------------------------------------------------------------------------------------------------
December 31, 2008...............................................         $59,382         $12,490         $46,892
December 31, 2009...............................................          59,876          13,999          45,876
----------------------------------------------------------------------------------------------------------------

2. Monthly Actuarial Rate for Enrollees Age 65 and Older
    The monthly actuarial rate for enrollees age 65 and older is one-
half of the sum of monthly amounts for: (1) The projected cost of 
benefits; and (2) administrative expenses for each enrollee age 65 and 
older, after adjustments to this sum to allow for interest earnings on 
assets in the trust fund and an adequate contingency margin. The 
contingency margin is an amount appropriate to provide for possible 
variation between actual and projected costs and to amortize any 
surplus assets or unfunded liabilities.
    The monthly actuarial rate for enrollees age 65 and older for 2010 
is determined by first establishing per-enrollee cost by type of 
service from program data through 2008 and then projecting these costs 
for subsequent years. The projection factors used for financing periods 
from January 1, 2007 through December 31, 2010 are shown in Table 2.
    As indicated in Table 3, the projected monthly rate required to pay 
for one-half of the total of benefits and administrative costs for 
enrollees age 65 and over for 2010 is $189.84. Based on current 
estimates, the assets are not sufficient to cover the amount of 
incurred, but unpaid, expenses and to provide for a significant degree 
of variation between actual and projected costs. Thus, a positive 
contingency margin is needed to increase assets to a more appropriate 
level. The monthly actuarial rate of $221.00 provides an adjustment of 
$34.32 for a contingency margin and -$3.16 for interest earnings.
    The size of the contingency margin for 2010 is affected by several 
factors. The first and largest factor involves current law formula for 
physician fees, which will result in a reduction in physician fees of 
approximately 21 percent in 2010 and is projected to cause additional 
reductions in subsequent years. Smaller scheduled reductions in 
physician payments have been legislatively avoided in every year since 
2002. In recognition of the strong possibility of substantial increases 
in Part B expenditures that would result from similar legislation to 
override the decreases in physician fees in 2010 or later years, it is 
appropriate to maintain a significantly larger Part B contingency 
reserve than would otherwise be necessary. The asset level projected 
for the end of 2009 is not adequate to accommodate this contingency.
    A second, much smaller factor underlying the need for an adequate 
contingency reserve, is the possibility for increased Part B costs in 
2010 as a result of a serious flu season.
    The third factor has a large impact on the level of the contingency 
reserve. As noted previously, for most Part B beneficiaries the hold-
harmless provision prevents their benefits under section 202 or 223 of 
the Act from decreasing as a result of an increase in the Part B 
premium. The increase in the benefits under section 202 and 223 of the 
Act is nearly certain to be 0 percent for 2010 and possibly for 2011. 
As a result, the increase in the Part B premium for 2010 (the $14.10 
increase from the 2009 standard monthly premium of $96.40 to the 2010 
standard monthly premium of $110.50) will be paid by only a small 
percentage of Part B enrollees. (Approximately 27 percent of 
beneficiaries are not subject to the hold-harmless provision because 
they are subject to the income-related additional premium amount (5 
percent), they are new enrollees during the year (3 percent), or they 
do not have their Part B premiums withheld from social security benefit 
payments (19 percent), including those who qualify for both Medicare 
and Medicaid and have their Part B premiums paid on their behalf by 
Medicaid (17 percent).) In order for Part B to be adequately funded in 
2010, the 2010 contingency margin has been increased to account for 
this situation. However, the result is a larger-than-usual premium paid 
by or on behalf of a minority of Part B enrollees.
    The traditional goal for the Part B reserve has been that assets 
minus liabilities at the end of a year should

[[Page 54575]]

represent between 15 and 20 percent of the following year's total 
incurred expenditures. Within this range, 17 percent has been the 
normal target. In view of the high probability that premiums and 
matching general revenues in 2010 will be inadequate, due to the hold-
harmless provision, and the strong likelihood of actual expenditures 
exceeding estimated levels, due to the enactment of legislation after 
the financing has been set for a given year, a contingency reserve 
ratio in excess of 20 percent of the following year's expenditures 
would better ensure that the assets of the Part B account can 
adequately cover the cost of incurred-but-not-reported benefits 
together with variations between actual and estimated cost levels.
    The actuarial rate of $221.00 per month for aged beneficiaries, as 
announced in this notice for 2010, reflects the combined net effect of 
the factors described above and the projection assumptions listed in 
Table 2.
3. Monthly Actuarial Rate for Disabled Enrollees
    Disabled enrollees are those persons under age 65 who are enrolled 
in Part B because of entitlement to Social Security disability benefits 
for more than 24 months or because of entitlement to Medicare under the 
end-stage renal disease (ESRD) program. Projected monthly costs for 
disabled enrollees (other than those with ESRD) are prepared in a 
fashion parallel to the projection for the aged using appropriate 
actuarial assumptions (see Table 2). Costs for the ESRD program are 
projected differently because of the different nature of services 
offered by the program.
    As shown in Table 4, the projected monthly rate required to pay for 
one-half of the total of benefits and administrative costs for disabled 
enrollees for 2010 is $222.93. The monthly actuarial rate of $270.40 
also provides an adjustment of -$3.64 for interest earnings and $51.11 
for a contingency margin, reflecting the same factors described above 
for the aged actuarial rate. Based on current estimates, the assets 
associated with the disabled Medicare beneficiaries are not sufficient 
to cover the amount of incurred, but unpaid, expenses and to provide 
for a significant degree of variation between actual and projected 
costs. Thus, a large contingency margin is needed to increase assets to 
an appropriate level.
    The actuarial rate of $270.40 per month for disabled beneficiaries, 
as announced in this notice for 2010, reflects the combined net effect 
of the factors described above for aged beneficiaries and the 
projection assumptions listed in Table 2.
4. Sensitivity Testing
    Several factors contribute to uncertainty about future trends in 
medical care costs. It is appropriate to test the adequacy of the rates 
using alternative assumptions. The results of those assumptions are 
shown in Table 5. One set represents increases that are lower and, 
therefore, more optimistic than the current estimate. The other set 
represents increases that are higher and, therefore, more pessimistic 
than the current estimate. The values for the alternative assumptions 
were determined from a statistical analysis of the historical variation 
in the respective increase factors.
    As indicated in Table 5, the monthly actuarial rates would result 
in an excess of assets over liabilities of $66,192 million by the end 
of December 2010 under the assumptions used in preparing this report. 
This amounts to 31 percent of the estimated total incurred expenditures 
for the following year.
    Assumptions that are somewhat more pessimistic (and that therefore 
test the adequacy of the assets to accommodate projection errors) 
produce a surplus of $42,525 million by the end of December 2010, which 
amounts to 18 percent of the estimated total incurred expenditures for 
the following year. Under fairly optimistic assumptions, the monthly 
actuarial rates would result in a surplus of $89,783 million by the end 
of December 2010, or 47 percent of the estimated total incurred 
expenditures for the following year.
    The above analysis indicates that the premium and general revenue 
financing established for 2010, together with existing Part B account 
assets would be adequate to cover estimated Part B costs for 2010 under 
current law, even if actual costs prove to be somewhat greater than 
expected.
5. Premium Rates and Deductible
    As determined in accordance with section 1839 of the Act, listed 
below are the 2010 Part B monthly premium rates to be paid by 
beneficiaries who file an individual tax return (including those who 
are single, head of household, qualifying widow(er) with dependent 
child, or married filing separately who lived apart from their spouse 
for the entire taxable year), or a joint tax return.

----------------------------------------------------------------------------------------------------------------
                                                                               Income-related
  Beneficiaries who file an individual tax    Beneficiaries who file a joint       monthly        Total monthly
             return with income:                  tax return with income:        adjustment      premium amount
                                                                                   amount
----------------------------------------------------------------------------------------------------------------
Less than or equal to $85,000...............  Less than or equal to $170,000             $0.00           $110.50
Greater than $85,000 and less than or equal   Greater than $170,000 and less             44.20            154.70
 to $107,000.                                  than or equal to $214,000.
Greater than $107,000 and less than or equal  Greater than $214,000 and less            110.50            221.00
 to $160,000.                                  than or equal to $320,000.
Greater than $160,000 and less than or equal  Greater than $320,000 and less            176.80            287.30
 to $214,000.                                  than or equal to $428,000.
Greater than $214,000.......................  Greater than $428,000.........            243.10            353.60
----------------------------------------------------------------------------------------------------------------

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

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

[[Page 54576]]

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


                                     Table 2--Projection Factors\1\ 12-Month Periods Ending December 31 of 2007-2010
                                                                      [In percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     Physicians' services    Durable                 Other                    Home                   Other
           Calendar year           ------------------------  medical    Carrier     carrier    Outpatient    health    Hospital  intermediary   Managed
                                     Fees\2\   Residual\3\  equipment    LAB\4\   services\5\    hospital    agency     LAB\6\    services\7\     care
--------------------------------------------------------------------------------------------------------------------------------------------------------
Aged:
    2007..........................       -1.4         3.5         2.9        9.8         4.7          8.5       18.8        3.2           8.4        3.6
    2008..........................        0.4         3.8         7.6        7.9         4.7          4.9       11.6        3.9           5.0        5.1
    2009..........................        1.7         4.0        -2.1       11.1         7.4          8.9       13.4        9.3           8.9        2.0
    2010..........................      -21.7         8.1         2.9        3.7         4.4          5.1        1.4       -1.7           5.1       -1.9
Disabled:
    2007..........................       -1.4         3.4         3.6       13.1         6.7          8.8       20.7        6.1           8.8        4.5
    2008..........................        0.4         4.1         7.8       12.4         9.1          6.8        9.8        5.7           6.9        4.8
    2009..........................        1.7         5.5         1.3       15.6        10.0          9.6       14.2       10.4           9.6        1.9
    2010..........................      -21.7         8.1         3.2        3.6         3.6          5.1        1.8       -1.7           5.1       -2.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ All values for services other than managed care are per fee-for-service enrollee. Managed care values are per managed care enrollee.
\2\ As recognized for payment under the program.
\3\ Increase in the number of services received per enrollee and greater relative use of more expensive services.
\4\ Includes services paid under the lab fee schedule furnished in the physician's office or an independent lab.
\5\ Includes physician-administered drugs, ambulatory surgical center facility costs, ambulance services, parenteral and enteral drug costs, supplies,
  etc.
\6\ Includes services paid under the lab fee schedule furnished in the outpatient department of a hospital.
\7\ Includes services furnished in dialysis facilities, rural health clinics, Federally qualified health centers, rehabilitation and psychiatric
  hospitals, etc.


    Table 3--Derivation of Monthly Actuarial Rate for Enrollees Age 65 and Over for Financing Periods Ending
                                   December 31, 2007 Through December 31, 2010
----------------------------------------------------------------------------------------------------------------
                                                                         Financing periods
                                                 ---------------------------------------------------------------
                                                      CY 2007         CY 2008         CY 2009         CY 2010
----------------------------------------------------------------------------------------------------------------
Covered services (at level recognized):
    Physician fee schedule......................           78.46           78.70           81.13           68.34
    Durable medical equipment...................            9.65            9.99            9.53            9.75
    Carrier lab \1\.............................            3.96            4.11            4.45            4.59
    Other carrier services \2\..................           19.74           19.88           20.81           21.60
    Outpatient hospital.........................           29.87           30.18           32.03           33.48
    Home health.................................            9.84           10.57           11.67           11.76
    Hospital lab \3\............................            2.80            2.79            2.98            2.91
    Other intermediary services \4\.............           13.26           13.53           14.54           13.93
    Managed care................................           41.93           49.89           54.74           54.51
                                                 ---------------------------------------------------------------
        Total services..........................          209.51          219.65          231.87          220.87
                                                 ===============================================================
Cost sharing:                                     ..............
    Deductible..................................           -5.33           -5.49           -5.50           -6.32
    Coinsurance.................................          -30.74          -30.31          -31.42          -28.29
                                                 ---------------------------------------------------------------
        Total benefits..........................          173.44          183.84          194.95          186.26
                                                 ===============================================================
Administrative expenses.........................            5.68            2.95            3.41            3.58
Incurred expenditures...........................          179.12          186.79          198.36          189.84
Value of interest...............................           -1.98           -3.35           -2.83           -3.16
Contingency margin for projection error and to              9.86            9.26           -2.83           34.32
 amortize the surplus or deficit................
                                                 ---------------------------------------------------------------
    Monthly actuarial rate......................          187.00          192.70          192.70          221.00
----------------------------------------------------------------------------------------------------------------
\1\ Includes services paid under the lab fee schedule furnished in the physician's office or an independent lab.
\2\ Includes physician-administered drugs, ambulatory surgical center facility costs, ambulance services,
  parenteral and enteral drug costs, supplies, etc.
\3\ Includes services paid under the lab fee schedule furnished in the outpatient department of a hospital.
\4\ Includes services furnished in dialysis facilities, rural health clinics, Federally qualified health
  centers, and rehabilitation and psychiatric hospitals, etc.


[[Page 54577]]


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


    Table 5--Actuarial Status of the Part B Account in the SMI Trust Fund Under Three Sets of Assumptions for
                                   Financing Periods Through December 31, 2010
----------------------------------------------------------------------------------------------------------------
                      As of December 31,                             2008             2009             2010
----------------------------------------------------------------------------------------------------------------
This projection:
    Actuarial status (in millions):..........................  ...............  ...............  ...............
    Assets...................................................         59,382           59,876           79,611
    Liabilities..............................................         12,490           13,999           13,419
                                                              --------------------------------------------------
    Assets less liabilities..................................         46,892           45,876           66,192
        Ratio (in percent) \1\...............................             22.6             22.7             31.4
                                                              ==================================================
Low cost projection:                                           ...............  ...............  ...............
    Actuarial status (in millions):..........................  ...............  ...............  ...............
    Assets...................................................         59,382           67,931          102,532
    Liabilities..............................................         12,490           13,188           12,748
                                                              --------------------------------------------------
    Assets less liabilities..................................         46,892           54,744           89,783
        Ratio (in percent) \1\...............................             23.6             29.2             47.4
                                                              ==================================================
High cost projection:                                          ...............  ...............  ...............
    Actuarial status (in millions):..........................  ...............  ...............  ...............
    Assets...................................................         59,382           52,148           56,681
    Liabilities..............................................         12,490           14,778           14,156
                                                              --------------------------------------------------
    Assets less liabilities..................................         46,892           37,370           42,525
        Ratio (in percent)\1\................................             21.8             17.2             18.2
----------------------------------------------------------------------------------------------------------------
\1\ Ratio of assets less liabilities at the end of the year to the total incurred expenditures during the
  following year, expressed as a percent.

III. Regulatory Impact Analysis

    We have examined the impacts of this notice as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. 
L. 96-354), section 1102(b) of the Social Security Act, section 202 of 
the Unfunded

[[Page 54578]]

Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on 
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 
804(2)).
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any one year).
    We have examined the impact of this notice as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review) and the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354). 
Executive Order 12866 directs agencies to assess all costs and benefits 
of available regulatory alternatives and, if regulation is necessary, 
to select regulatory approaches that maximize net benefits (including 
potential economic, environmental, public health and safety effects, 
distributive impacts, and equity).
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses, if a rule has a significant impact on a 
substantial number of small entities. For purposes of the RFA, small 
entities include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Most hospitals and most other providers and 
suppliers are small entities, either by nonprofit status or by having 
revenues of $7 million to $34.5 million in any 1 year. Individuals and 
States are not included in the definition of a small entity. Therefore, 
the Secretary has determined that this notice will not have a 
significant economic impact on a substantial number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds. The Secretary has 
determined that this notice will not have a significant impact on the 
operations of a substantial number of small rural hospitals. Therefore, 
we are not preparing analyses for either the RFA or section 1102(b) of 
the Act.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2008, that 
threshold is approximately $133 million. This notice does not contain 
mandates that will impose spending costs on State, local or tribal 
governments in the aggregate, or by the private sector in any one year 
of $133 million or more.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it publishes a proposed rule (and subsequent 
final rule) that imposes substantial direct compliance costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. We have determined that this notice does not 
significantly affect the rights, roles, and responsibilities of States.
    This notice announces that the monthly actuarial rates applicable 
for 2010 are $221.00 for enrollees age 65 and over and $270.40 for 
disabled enrollees under age 65. The Part B deductible for calendar 
year 2010 is $155.00. The notice also announces the 2010 monthly Part B 
premium rates to be paid by beneficiaries who file an individual tax 
return (including those who are single, head of household, qualifying 
widow(er) with a dependent child, or married filing separately who 
lived apart from their spouse for the entire taxable year), or a joint 
tax return.

----------------------------------------------------------------------------------------------------------------
                                                                               Income-related
  Beneficiaries who file an individual tax    Beneficiaries who file a joint   monthly adjust-    Total monthly
             return with income:                  tax return with income:        ment amount     premium amount
----------------------------------------------------------------------------------------------------------------
Less than or equal to $85,000...............  Less than or equal to $170,000             $0.00           $110.50
Greater than $85,000 and less than or equal   Greater than $170,000 and less             44.20            154.70
 to $107,000.                                  than or equal to $214,000.
Greater than $107,000 and less than or equal  Greater than $214,000 and less            110.50            221.00
 to $160,000.                                  than or equal to $320,000.
Greater than $160,000 and less than or equal  Greater than $320,000 and less            176.80            287.30
 to $214,000.                                  than or equal to $428,000.
Greater than $214,000.......................  Greater than $428,000.........            243.10            353.60
----------------------------------------------------------------------------------------------------------------

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

    The standard Part B premium rate of $110.50 is $14.10 higher than 
the premium for 2009, so there will be about $2 billion of additional 
costs in 2010 to the approximately 12 million Part B enrollees who pay 
the increase in the Part B premium. Therefore, this notice is a major 
rule as defined in 5 U.S.C. 804(2) and is an economically significant 
rule under Executive Order 12866.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

[[Page 54579]]

IV. Waiver of Proposed Notice

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

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

    Dated: October 14, 2009.
Charlene Frizzera,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: October 16, 2009.
Kathleen Sebelius,
Secretary.
[FR Doc. E9-25370 Filed 10-16-09; 4:15 pm]
BILLING CODE 4120-01-P