[Federal Register Volume 84, Number 219 (Wednesday, November 13, 2019)]
[Notices]
[Pages 61625-61633]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24440]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-8073-N]
RIN 0938-AT78


Medicare Program; Medicare Part B Monthly Actuarial Rates, 
Premium Rates, and Annual Deductible Beginning January 1, 2020

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, 2020. In addition, this notice announces the 
monthly premium for aged and disabled beneficiaries, the deductible for 
2020, and 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 2020 are $283.20 for 
aged enrollees and $343.60 for disabled enrollees. The standard monthly 
Part B premium rate for all enrollees for 2020 is $144.60, which is 
equal to 50 percent of the monthly actuarial rate for aged enrollees 
(or approximately 25 percent of the expected average total cost of Part 
B coverage for aged enrollees) plus $3.00 repayment amount required 
under current law. (The 2019 standard premium rate was $135.50, which 
included the $3.00 repayment amount.) The Part B deductible for 2020 is 
$198.00 for all Part B beneficiaries. If a beneficiary has to pay an 
income-related monthly adjustment, he or she will have to pay a total 
monthly premium of about 35, 50, 65, 80 or 85 percent of the total cost 
of Part B coverage plus a repayment amount of $4.20, $6.00, $7.80, 
$9.60 or $10.20 respectively.

DATES: The monthly actuarial rates, premium rates, and annual 
deductible announced in this notice are effective January 1, 2020.

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, and 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 to aliens who were lawfully admitted for permanent 
residence and have resided in the United States for 5 consecutive 
years. Part B requires enrollment and payment of monthly premiums, as 
described in 42 CFR part 407, subpart B, and part 408, respectively. 
The premiums paid by (or on behalf of) all enrollees fund approximately 
one-fourth of the total incurred costs, and transfers from the general 
fund of the Treasury pay approximately three-fourths of these costs.
    The Secretary of the Department of Health and Human Services (the 
Secretary) is required by section 1839 of the Social Security Act (the 
Act) to announce the Part B monthly actuarial rates for aged and 
disabled beneficiaries as well as the monthly Part B premium. The Part 
B annual deductible is included because its determination is directly 
linked to the aged actuarial rate.
    The monthly actuarial rates for aged and disabled enrollees are 
used to determine the correct amount of general revenue financing per 
beneficiary each month. These amounts, according to actuarial 
estimates, will equal, respectively, one-half of the expected average 
monthly cost of Part B for each aged enrollee (age 65 or over) and one-
half of 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, section 629 
of the MMA (amending section 1833(b) of the Act) required 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 2020 
Part B deductible is calculated by multiplying the 2019 deductible by 
the ratio of the 2020 aged actuarial rate to the 2019 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

[[Page 61626]]

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 one-sixth for 1998, one-third for 1999, one-half for 
2000, two-thirds for 2001, and five-sixths 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 one-seventh of the cost be transferred in 
1998, two-sevenths in 1999, three-sevenths in 2000, four-sevenths in 
2001, five-sevenths in 2002, and six-sevenths 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 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 2020, $87,000 for a 
beneficiary filing an individual income tax return and $174,000 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 now have to pay an income-related monthly adjustment 
amount. The MMA made no change to the actuarial rate calculation, and 
the standard premium, which will continue to be paid by beneficiaries 
whose modified adjusted gross income is below the applicable 
thresholds, still represents 25 percent of the estimated total cost to 
the program of Part B coverage for an aged enrollee. However, depending 
on income and tax filing status, a beneficiary can now be responsible 
for 35, 50, 65, 80, or 85 percent of the estimated total cost of Part B 
coverage, rather than 25 percent. Section 402 of the Medicare Access 
and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10) modified 
the income thresholds beginning with 2018, and section 53114 of the 
Bipartisan Budget Act of 2018 (BBA of 2018) (Pub. L. 115-123) further 
modified the income thresholds beginning with 2019. For years beginning 
with 2019, the BBA of 2018 established a new income threshold. If a 
beneficiary's modified adjusted gross income is greater than or equal 
to $500,000 for a beneficiary filing an individual income tax return 
and $750,000 for a beneficiary filing a joint tax return, the 
beneficiary is responsible for 85 percent of the estimated total cost 
of Part B coverage. The BBA of 2018 specified that these new income 
threshold levels will be inflation-adjusted beginning in 2028. The end 
result of the higher premium is that the Part B premium subsidy is 
reduced, and less general revenue financing is required, for 
beneficiaries with higher income because they are paying a larger share 
of the total cost with their premium. That is, the premium subsidy 
continues to be approximately 75 percent for beneficiaries with income 
below the applicable income thresholds, but it will be reduced for 
beneficiaries with income above these thresholds. The MMA specified 
that there be a 5-year transition period to reach 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.
    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 2015, the expenditure was made from the 
trust fund because the allocation was temporarily extended. However, 
because the extension occurred after the financing was determined, the 
allocation was not included in the calculation of the financing rates 
for these years. Section 211 of MACRA permanently extended this 
expenditure, which is included in the calculation of the Part B 
actuarial rates for 2016 and subsequent years.
    Another 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) of the Act 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 premium 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

[[Page 61627]]

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 
December's Part B premium has been deducted from it.
    Generally, if a beneficiary qualifies for hold-harmless protection, 
the reduced premium for the individual for that January and for each of 
the succeeding 11 months is the greater of either--
     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.
    Section 1839 of the Act, as amended by section 601(a) of the 
Bipartisan Budget Act of 2015 (Pub. L. 114-74), specified that the 2016 
actuarial rate for enrollees age 65 and older be determined as if the 
hold-harmless provision did not apply. The premium revenue that was 
lost by using the resulting lower premium (excluding the foregone 
income-related premium revenue) was replaced by a transfer of general 
revenue from the Treasury, which will be repaid over time to the 
general fund.
    Starting in 2016, in order to repay the balance due (which includes 
the transfer amount and the foregone income-related premium revenue), 
the Part B premium otherwise determined will be increased by $3.00. 
These repayment amounts will be added to the Part B premium otherwise 
determined each year and paid back to the general fund of the Treasury 
and will continue until the balance due is paid back.
    High-income enrollees pay the $3 repayment amount plus an 
additional $1.20, $3.00, $4.80, $6.60, or $7.20 in repayment as part of 
the income-related monthly adjustment amount (IRMAA) premium dollars, 
which reduce (dollar for dollar) the amount of general revenue received 
by Part B from the general fund of the Treasury. Because of this 
general revenue offset, the repayment IRMAA premium dollars are not 
included in the direct repayments made to the general fund of the 
Treasury from Part B in order to avoid a double repayment. (Only the 
$3.00 monthly repayment amounts are included in the direct repayments).
    These repayment amounts will continue until the total amount 
collected is equal to the beginning balance due. (In the final year of 
the repayment, the additional amounts may be modified to avoid an 
overpayment.) The repayment amounts (excluding the repayment amounts 
for high-income enrollees) are subject to the hold-harmless provision. 
The beginning balance due was $9,066,409,000, consisting of 
$1,625,761,000 in foregone income-related premium revenue plus a 
transfer amount of $7,440,648,000. An estimated $4,804,297,000 will 
have been collected for repayment to the general fund by the end of 
2019.

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 2020 are 
$283.20 for enrollees age 65 and over and $343.60 for disabled 
enrollees under age 65. In section II.B. of this notice, we present the 
actuarial assumptions and bases from which these rates are derived. The 
Part B standard monthly premium rate for all enrollees for 2020 is 
$144.60.
    The following are the 2020 Part B monthly premium rates to be paid 
by (or on behalf of) beneficiaries who file either individual tax 
returns (and are single individuals, heads of households, qualifying 
widows or widowers with dependent children, or married individuals 
filing separately who lived apart from their spouses for the entire 
taxable year), or joint tax returns.

----------------------------------------------------------------------------------------------------------------
                                                                            Income-related
   Beneficiaries who file individual tax    Beneficiaries who file joint  monthly adjustment     Total monthly
            returns with income               tax returns with  income           amount         premium amount
----------------------------------------------------------------------------------------------------------------
Less than or equal to $87,000.............  Less than or equal to                      $0.00             $144.60
                                             $174,000.
Greater than $87,000 and less than or       Greater than $174,000 and                  57.80              202.40
 equal to $109,000.                          less than or equal to
                                             $218,000.
Greater than $109,000 and less than or      Greater than $218,000 and                 144.60              289.20
 equal to $136,000.                          less than or equal to
                                             $272,000.
Greater than $136,000 and less than or      Greater than $272,000 and                 231.40              376.00
 equal to $163,000.                          less than or equal to
                                             $326,000.
Greater than $163,000 and less than         Greater than $326,000 and                 318.10              462.70
 $500,000.                                   less than $750,000.
Greater than or equal to $500,000.........  Greater than or equal to                  347.00              491.60
                                             $750,000.
----------------------------------------------------------------------------------------------------------------

    In addition, the monthly premium rates to be paid by (or on behalf 
of) beneficiaries who are married and lived with their spouses at any 
time during the taxable year, but who file separate tax returns from 
their spouses, are as follows:

[[Page 61628]]



------------------------------------------------------------------------
  Beneficiaries who are married
 and lived with their spouses at    Income-related
  any time during the year, but   monthly adjustment     Total monthly
  who file separate tax returns          amount         premium amount
       from their spouses
------------------------------------------------------------------------
Less than or equal to $87,000...               $0.00             $144.60
Greater than $87,000 and less                 318.10              462.70
 than $413,000..................
Greater than or equal to                      347.00              491.60
 $413,000.......................
------------------------------------------------------------------------

    The Part B annual deductible for 2020 is $198.00 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 2020

    The actuarial assumptions and bases used to determine the monthly 
actuarial rates and the monthly premium rates for Part B are 
established by the Centers for Medicare & Medicaid Services Office of 
the Actuary. The estimates underlying these determinations are prepared 
by actuaries meeting the qualification standards and following the 
actuarial standards of practice established by the Actuarial Standards 
Board.
1. Actuarial Status of the Part B Account in the Supplementary Medical 
Insurance Trust Fund
    Under section 1839 of the Act, 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 2018 and 2019.

 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 (in      Liabilities (in    liabilities (in
                                                             millions)          millions)          millions)
----------------------------------------------------------------------------------------------------------------
December 31, 2018......................................            $96,343            $30,102            $66,241
December 31, 2019......................................             98,497             32,752             65,746
----------------------------------------------------------------------------------------------------------------

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 2020 
is determined by first establishing per enrollee costs by type of 
service from program data through 2018 and then projecting these costs 
for subsequent years. The projection factors used for financing periods 
from January 1, 2017 through December 31, 2020 are shown in Table 2.
    As indicated in Table 3, the projected per enrollee amount required 
to pay for one-half of the total of benefits and administrative costs 
for enrollees age 65 and over for 2020 is $281.31. Based on current 
estimates, the assets associated with the aged Medicare beneficiaries 
at the end of 2019 are not fully 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. The monthly actuarial rate of $283.20 
provides an adjustment of $4.08 for a contingency margin and -$2.19 for 
interest earnings.
    The contingency margin for 2020 is affected by several factors. 
Starting in 2011, manufacturers and importers of brand-name 
prescription drugs pay a fee that is allocated to the Part B account of 
the SMI trust. For 2020, the total of these brand-name drug fees is 
estimated to be $2.8 billion. The contingency margin has been reduced 
to account for this additional revenue.
    The traditional goal for the Part B reserve has been that assets 
minus liabilities at the end of a year should represent between 15 and 
20 percent of the following year's total incurred expenditures. To 
accomplish this goal, a 17-percent reserve ratio, which is a fully 
adequate contingency reserve level, has been the normal target used to 
calculate the Part B premium. Assets at the end of 2019 are expected to 
be below the fully adequate level. The financing rates for 2020 are set 
to restore the asset level in the Part B account to the fully adequate 
level by the end of 2020 under current law. The actuarial rate of

[[Page 61629]]

$283.20 per month for aged beneficiaries, as announced in this notice 
for 2020, reflects that combined effect of the factors previously 
described and the projected 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 
manner 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 per enrollee amount required to 
pay for one-half of the total of benefits and administrative costs for 
disabled enrollees for 2020 is $347.33. The monthly actuarial rate of 
$343.60 also provides an adjustment of -$2.83 for interest earnings and 
-$0.90 for a contingency margin, reflecting the same factors described 
previously for the aged actuarial rate at magnitudes appropriate to the 
disabled rate determination. Based on current estimates, the assets 
associated with the disabled Medicare beneficiaries at the end of 2020 
are sufficient to cover the amount of incurred, but unpaid, expenses 
and to provide for a significant degree of variation between actual and 
projected costs. A negative contingency margin is needed to maintain 
assets at an appropriate level.
    The actuarial rate of $343.60 per month for disabled beneficiaries, 
as announced in this notice for 2020, reflects the combined net effect 
of the factors described previously 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 cost growth rate assumptions. The results of those 
assumptions are shown in Table 5. One set represents increases that are 
higher and, therefore, more pessimistic than the current estimate. The 
other set represents increases that are lower and, therefore, more 
optimistic 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 $73,860 million by the end 
of December 2020 under the cost growth rate assumptions shown in Table 
2 and assuming that the provisions of current law are fully 
implemented. This result amounts to 17.0 percent of the estimated total 
incurred expenditures for the following year.
    Assumptions that are somewhat more pessimistic (and that therefore 
test the adequacy of the assets to accommodate projection errors) 
produce a surplus of $15,880 million by the end of December 2020 under 
current law, which amounts to 3.3 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 
$132,071 million by the end of December 2020, or 34.7 percent of the 
estimated total incurred expenditures for the following year.
    The sensitivity analysis indicates that the premium and general 
revenue financing established for 2020, together with existing Part B 
account assets, would be adequate to cover estimated Part B costs for 
2020 under current law should actual costs prove to be somewhat greater 
than expected.
5. Premium Rates and Deductible
    As determined in accordance with section 1839 of the Act, the 
following are the 2020 Part B monthly premium rates to be paid by 
beneficiaries who file either individual tax returns (and are single 
individuals, heads of households, qualifying widows or widowers with 
dependent children, or married individuals filing separately who lived 
apart from their spouses for the entire taxable year), or joint tax 
returns.

----------------------------------------------------------------------------------------------------------------
                                                                            Income-related
   Beneficiaries who file individual tax    Beneficiaries who file joint  monthly adjustment     Total monthly
            returns with income               tax returns with  income          amount          premium amount
----------------------------------------------------------------------------------------------------------------
Less than or equal to $87,000.............  Less than or equal to                      $0.00             $144.60
                                             $174,000.
Greater than $87,000 and less than or       Greater than $174,000 and                  57.80              202.40
 equal to $109,000.                          less than or equal to
                                             $218,000.
Greater than $109,000 and less than or      Greater than $218,000 and                 144.60              289.20
 equal to $136,000.                          less than or equal to
                                             $272,000.
Greater than $136,000 and less than or      Greater than $272,000 and                 231.40              376.00
 equal to $163,000.                          less than or equal to
                                             $326,000.
Greater than $163,000 and less than         Greater than $326,000 and                 318.10              462.70
 $500,000.                                   less than $750,000.
Greater than or equal to $500,000.........  Greater than or equal to                  347.00              491.60
                                             $750,000.
----------------------------------------------------------------------------------------------------------------

    In addition, the monthly premium rates to be paid by beneficiaries 
who are married and lived with their spouses at any time during the 
taxable year, but who file separate tax returns from their spouses, are 
as follows:

------------------------------------------------------------------------
  Beneficiaries who are married
 and lived with their spouses at    Income-related
  any time during the year, but   monthly adjustment     Total monthly
  who file separate tax returns          amount         premium amount
       from their spouses
------------------------------------------------------------------------
Less than or equal to $87,000...               $0.00             $144.60
Greater than $87,000 and less                 318.10              462.70
 than $413,000..................
Greater than or equal to                      347.00              491.60
 $413,000.......................
------------------------------------------------------------------------


[[Page 61630]]


                                                                                 Table 2--Projection Factors \1\
                                                                        12-Month Periods Ending December 31 of 2017-2020
                                                                                          [In percent]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                    Other
                                                         Physicians'     Durable    Carrier lab    Physician-      carrier     Outpatient  Home health    Hospital        Other        Managed
                    Calendar year                         services       medical        \2\       administered     services     hospital      agency      lab \4\     intermediary       care
                                                                        equipment                     drugs          \3\                                              services \5\
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Aged:
    2017.............................................             1.2         -5.5          4.0             6.8          4.3          7.4         -2.0          1.1             4.8          2.8
    2018.............................................             1.7         17.9         11.2            12.3          2.4          8.7          3.3         -0.9             7.7          7.5
    2019.............................................             3.7          6.1          2.3            10.8          2.4          7.1          4.3         -3.2             5.8          7.4
    2020.............................................             1.9         -1.3         -2.1             8.8          2.4          8.3          4.0         -2.3             4.7          5.5
Disabled:
    2017.............................................             0.6          0.0         -0.7             5.4         10.1          6.1         -2.0         -0.3             9.3          3.9
    2018.............................................             2.0         18.5          6.1            10.9          4.7          7.6          2.6          1.3             9.1          7.7
    2019.............................................             4.9          6.6          8.2            11.7          4.9         12.0          6.5         -0.8            10.5          7.1
    2020.............................................             1.9         -1.6         -2.2             8.7          2.4          8.4          5.6         -2.4             5.8          5.8
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ All values for services other than managed care are per fee-for-service enrollee. Managed care values are per managed care enrollee.
\2\ Includes services paid under the lab fee schedule furnished in the physician's office or an independent lab.
\3\ Includes ambulatory surgical center facility costs, ambulance services, parenteral and enteral drug costs, supplies, etc.
\4\ Includes services paid under the lab fee schedule furnished in the outpatient department of a hospital.
\5\ 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, 2017 Through December 31, 2020
----------------------------------------------------------------------------------------------------------------
                                                      CY 2017         CY 2018         CY 2019         CY 2020
----------------------------------------------------------------------------------------------------------------
Covered services (at level recognized):
    Physician fee schedule......................          $73.34          $72.32          $73.14          $73.63
    Durable medical equipment...................            5.29            6.06            6.27            6.12
    Carrier lab \1\.............................            3.96            4.27            4.26            4.13
    Physician-administered drugs................           14.74           16.08           17.37           18.69
    Other carrier services \2\..................            9.39            9.35            9.33            9.46
    Outpatient hospital.........................           46.96           49.62           51.81           55.53
    Home health.................................            8.97            9.00            9.15            9.42
    Hospital lab \3\............................            2.26            2.17            2.05            1.98
    Other intermediary services \4\.............           17.81           18.64           19.22           19.91
    Managed care................................           89.57          100.73          112.29          120.27
                                                 ---------------------------------------------------------------
        Total services..........................          272.27          288.24          304.89          319.14
Cost sharing:
    Deductible..................................           -6.47           -6.41           -6.48           -6.94
    Coinsurance.................................          -27.99          -28.63          -28.77          -29.39
Sequestration of benefits.......................           -4.75           -5.06           -5.39           -5.65
HIT payment incentives..........................           -0.17            0.16            0.00            0.00
                                                 ---------------------------------------------------------------
        Total benefits..........................          232.89          248.30          264.25          277.16
Administrative expenses.........................            4.50            3.98            4.23            4.15
                                                 ---------------------------------------------------------------
Incurred expenditures...........................          237.39          252.28          268.48          281.31
Value of interest...............................           -1.61           -1.80           -2.02           -2.19
Contingency margin for projection error and to             26.12           11.42           -1.56            4.08
 amortize the surplus or deficit................
                                                 ---------------------------------------------------------------
        Monthly actuarial rate..................          261.90          261.90          264.90          283.20
----------------------------------------------------------------------------------------------------------------
\1\ Includes services paid under the lab fee schedule furnished in the physician's office or an independent lab.
\2\ Includes 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 4--Derivation of Monthly Actuarial Rate for Disabled Enrollees for Financing Periods Ending December 31,
                                         2017 Through December 31, 2020
----------------------------------------------------------------------------------------------------------------
                                                      CY 2017         CY 2018         CY 2019         CY 2020
----------------------------------------------------------------------------------------------------------------
Covered services (at level recognized):
    Physician fee schedule......................          $76.62          $74.87          $74.06          $72.41
    Durable medical equipment...................           10.97           12.41           12.40           11.69
    Carrier lab \1\.............................            5.66            5.83            5.95            5.58
    Physician-administered drugs................           14.23           15.19           15.97           16.64
    Other carrier services \2\..................           12.51           12.65           12.52           12.33
    Outpatient hospital.........................           64.96           66.98           69.93           72.67
    Home health.................................            7.08            6.93            6.89            6.94
    Hospital lab \3\............................            2.73            2.67            2.50            2.34

[[Page 61631]]

 
    Other intermediary services \4\.............           47.21           52.09           53.28           53.58
    Managed care................................           90.59          106.01          125.96          141.72
                                                 ---------------------------------------------------------------
        Total services..........................          332.57          355.64          379.44          395.91
Cost sharing:
    Deductible..................................           -6.21           -6.15           -3.53           -4.21
    Coinsurance.................................          -41.93          -43.18          -46.89          -44.44
Sequestration of benefits.......................           -5.68           -6.12           -6.57           -6.94
HIT payment incentives..........................           -0.18            0.16            0.00            0.00
                                                 ---------------------------------------------------------------
        Total benefits..........................          278.57          300.34          322.45          340.32
Administrative expenses.........................            5.38            4.82            6.84            7.01
                                                 ---------------------------------------------------------------
Incurred expenditures...........................          283.94          305.16          329.29          347.33
Value of interest...............................           -3.01           -2.75           -2.82           -2.83
Contingency margin for projection error and to            -26.74           -7.41          -11.07           -0.90
 amortize the surplus or deficit................
                                                 ---------------------------------------------------------------
        Monthly actuarial rate..................          254.20          295.00          315.40          343.60
----------------------------------------------------------------------------------------------------------------
\1\ Includes services paid under the lab fee schedule furnished in the physician's office or an independent lab.
\2\ Includes 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, 2020
----------------------------------------------------------------------------------------------------------------
                       As of December 31,                              2018            2019            2020
----------------------------------------------------------------------------------------------------------------
Actuarial status (in millions):
    Assets......................................................         $96,343         $98,497        $108,114
    Liabilities.................................................         $30,102         $32,752         $34,253
                                                                 -----------------------------------------------
        Assets less liabilities.................................         $66,241         $65,746         $73,860
Ratio \1\.......................................................           17.8%           16.5%           17.0%
Low-cost projection:
    Actuarial status (in millions):.............................
        Assets..................................................         $96,343        $117,416        $164,412
        Liabilities.............................................         $30,102         $30,650         $32,341
                                                                 -----------------------------------------------
            Assets less liabilities.............................         $66,241         $86,766        $132,071
Ratio \1\.......................................................           18.9%           24.1%           34.7%
High-cost projection:
    Actuarial status (in millions):.............................
        Assets..................................................         $96,343         $79,283         $51,985
        Liabilities.............................................         $30,102         $34,887         $36,105
                                                                 -----------------------------------------------
            Assets less liabilities.............................         $66,241         $44,396         $15,880
Ratio \1\.......................................................           16.9%           10.1%            3.3%
----------------------------------------------------------------------------------------------------------------
\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. Collection of Information Requirements

    This document does not impose information collection requirements--
that is, reporting, recordkeeping, or third-party disclosure 
requirements. Consequently, there is no need for review by the Office 
of Management and Budget under the authority of the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501 et seq.).

IV. Regulatory Impact Analysis

A. Statement of Need

    Section 1839 of the Act requires us to annually announce (that is, 
by September 30th of each year) the Part B monthly actuarial rates for 
aged and disabled beneficiaries as well as the monthly Part B premium. 
We also announce the Part B annual deductible because its determination 
is directly linked to the aged actuarial rate.

B. Overall Impact

    We have examined the impacts of this notice as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA) 
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social 
Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 
(March 22, 1995, Pub. L. 104-4), Executive Order 13132 on Federalism

[[Page 61632]]

(August 4, 1999), the Congressional Review Act (5 U.S.C. 804(2)), and 
Executive Order 13771 on Reducing and Controlling Regulatory Costs 
(January 30, 2017).
    Executive Orders 12866 and 13563 direct 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 notices 
with economically significant effects ($100 million or more in any one 
year). The 2020 standard Part B premium of $144.60 is $9.10 higher than 
the 2019 premium of $135.50. We estimate that this premium increase, 
for the approximately 57 million Part B enrollees in 2020, will have an 
annual effect on the economy of $100 million or more. As a result, this 
notice is economically significant under section 3(f)(1) of Executive 
Order 12866 and is a major action as defined under the Congressional 
Review Act (5 U.S.C. 804(2)).
    As discussed earlier, this notice announces that the monthly 
actuarial rates applicable for 2020 are $283.20 for enrollees age 65 
and over and $343.60 for disabled enrollees under age 65. It also 
announces the 2020 monthly Part B premium rates to be paid by 
beneficiaries who file either individual tax returns (and are single 
individuals, heads of households, qualifying widows or widowers with 
dependent children, or married individuals filing separately who lived 
apart from their spouses for the entire taxable year), or joint tax 
returns.

----------------------------------------------------------------------------------------------------------------
                                                                            Income-related
   Beneficiaries who file individual tax    Beneficiaries who file joint  monthly adjustment     Total monthly
            returns with income               tax returns with  income           amount         premium amount
----------------------------------------------------------------------------------------------------------------
Less than or equal to $87,000.............  Less than or equal to                      $0.00             $144.60
                                             $174,000.
Greater than $87,000 and less than or       Greater than $174,000 and                  57.80              202.40
 equal to $109,000.                          less than or equal to
                                             $218,000.
Greater than $109,000 and less than or      Greater than $218,000 and                 144.60              289.20
 equal to $136,000.                          less than or equal to
                                             $272,000.
Greater than $136,000 and less than or      Greater than $272,000 and                 231.40              376.00
 equal to $163,000.                          less than or equal to
                                             $326,000.
Greater than $163,000 and less than         Greater than $326,000 and                 318.10              462.70
 $500,000.                                   less than $750,000.
Greater than or equal to $500,000.........  Greater than or equal to                  347.00              491.60
                                             $750,000.
----------------------------------------------------------------------------------------------------------------

    In addition, the monthly premium rates to be paid by beneficiaries 
who are married and lived with their spouses at any time during the 
taxable year, but who file separate tax returns from their spouses, are 
also announced and listed in the following chart:

------------------------------------------------------------------------
  Beneficiaries who are married
 and lived with their spouses at    Income-related
  any time during the year, but   monthly adjustment     Total monthly
  who file separate tax returns          amount         premium amount
       from their spouses
------------------------------------------------------------------------
Less than or equal to $87,000...               $0.00             $144.60
Greater than $87,000 and less                 318.10              462.70
 than $413,000..................
Greater than or equal to                      347.00              491.60
 $413,000.......................
------------------------------------------------------------------------

    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. Individuals and states are not included in 
the definition of a small entity. This notice announces the monthly 
actuarial rates for aged (age 65 and over) and disabled (under 65) 
beneficiaries enrolled in Part B of the Medicare SMI program beginning 
January 1, 2020. Also, 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. As a result, we are not 
preparing an analysis for the RFA because 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. As we discussed 
previously, we are not preparing an analysis for section 1102(b) of the 
Act because the Secretary has determined that this notice will not have 
a significant effect on a substantial number of small rural hospitals.
    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 one year of 
$100 million in 1995 dollars, updated annually for inflation. In 2019, 
that threshold is approximately $154 million. Part B enrollees who are 
also enrolled in Medicaid have their monthly Part B premiums paid by 
Medicaid. The cost to each state Medicaid program from the 2020 premium 
increase is estimated to be less than the threshold. This notice does 
not impose mandates that will have a consequential effect of the 
threshold amount or more on state, local, or tribal governments or on 
the private sector.
    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

[[Page 61633]]

responsibilities of states. Accordingly, the requirements of Executive 
Order 13132 do not apply to this notice.
    Executive Order 13771, titled ``Reducing Regulation and Controlling 
Regulatory Costs,'' was issued on January 30, 2017 (82 FR 9339, 
February 3, 2017). It has been determined that this notice is a 
transfer notice that does not impose more than de minimis costs and 
thus is not a regulatory action for the purposes of E.O. 13771.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

V. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment prior to a rule taking 
effect in accordance with section 1871 of the Act and section 553(b) of 
the Administrative Procedure Act (APA). Section 1871(a)(2) of the Act 
provides that no rule, requirement, or other statement of policy (other 
than a national coverage determination) that establishes or changes a 
substantive legal standard governing the scope of benefits, the payment 
for services, or the eligibility of individuals, entities, or 
organizations to furnish or receive services or benefits under Medicare 
shall take effect unless it is promulgated through notice and comment 
rulemaking. Unless there is a statutory exception, section 1871(b)(1) 
of the Act generally requires the Secretary of the Department of Health 
and Human Services (the Secretary) to provide for notice of a proposed 
rule in the Federal Register and provide a period of not less than 60 
days for public comment before establishing or changing a substantive 
legal standard regarding the matters enumerated by the statute. 
Similarly, under 5 U.S.C. 553(b) of the APA, the agency is required to 
publish a notice of proposed rulemaking in the Federal Register before 
a substantive rule takes effect. Section 553(d) of the APA and section 
1871(e)(1)(B)(i) of the Act usually require a 30-day delay in effective 
date after issuance or publication of a rule, subject to exceptions. 
Sections 553(b)(B) and 553(d)(3) of the APA provide for exceptions from 
the advance notice and comment requirement and the delay in effective 
date requirements. Sections 1871(b)(2)(C) and 1871(e)(1)(B)(ii) of the 
Act also provide exceptions from the notice and 60-day comment period 
and the 30-day delay in effective date. Section 553(b)(B) of the APA 
and section 1871(b)(2)(C) of the Act expressly authorize an agency to 
dispense with notice and comment rulemaking for good cause if the 
agency makes a finding that notice and comment procedures are 
impracticable, unnecessary, or contrary to the public interest.
    The annual updated amounts for the Part B monthly actuarial rates 
for aged and disabled beneficiaries, the Part B premium, and Part B 
deductible set forth in this notice do not establish or change a 
substantive legal standard regarding the matters enumerated by the 
statute or constitute a substantive rule which would be subject to the 
notice requirements in section 553(b) of the APA. However, to the 
extent that an opportunity for public notice and comment could be 
construed as required for this notice, we find good cause to waive this 
requirement.
    Section 1839 of the Act requires the Secretary to determine the 
monthly actuarial rates for aged and disabled beneficiaries as well as 
the monthly Part B premium (including the income-related monthly 
adjustment amounts to be paid by beneficiaries with modified adjusted 
gross income above certain threshold amounts) for each calendar year in 
accordance with the statutory formulae, in September preceding the year 
to which they will apply. Further, the statute requires that the agency 
promulgate the Part B premium amount, in September preceding the year 
to which it will apply, and include a public statement setting forth 
the actuarial assumptions and bases employed by the Secretary in 
arriving at the amount of an adequate actuarial rate for enrollees age 
65 and older. We include the Part B annual deductible, which is 
established pursuant to a specific formula described in section 1833(b) 
of the Act, because the determination of the amount is directly linked 
to the rate of increase in actuarial rate under section 1839(a)(1) of 
the Act. We have calculated the monthly actuarial rates for aged and 
disabled beneficiaries, the Part B deductible, and the monthly Part B 
premium as directed by the statute; the statute establishes both when 
the monthly actuarial rates for aged and disabled beneficiaries and the 
monthly Part B premium must be published and the information that the 
Secretary must factor into those amounts, so we do not have any 
discretion in that regard. We find notice and comment procedures to be 
unnecessary for this notice and we find good cause to waive such 
procedures under section 553(b)(B) of the APA and section 1871(b)(2)(C) 
of the Act, if such procedures may be construed to be required at all. 
Through this notice, we are simply notifying the public of the updates 
to the monthly actuarial rates for aged and disabled beneficiaries, the 
Part B deductible, as well as the monthly Part B premium amounts and 
the income-related monthly adjustment amounts to be paid by certain 
beneficiaries, in accordance with the statute, for CY 2020. As such, we 
also note that even if notice and comment procedures were required for 
this notice, for the previously stated reason, we would find good cause 
to waive the delay in effective date of the notice, as additional delay 
would be contrary to the public interest under section 
1871(e)(1)(B)(ii) of the Act. Publication of this notice is consistent 
with section 1839 of the Act, and we believe that any potential delay 
in the effective date of the notice, if such delay were required at 
all, could cause unnecessary confusion both for the agency and Medicare 
beneficiaries.

    Dated: October 24, 2019.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.

    Dated: October 28, 2019.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2019-24440 Filed 11-8-19; 4:15 pm]
BILLING CODE 4120-01-P