Medicare premium rates will remain stable throughout the next year for 95% of the nation’s elderly due to several contributing factors, reported the Centers for Medicare and Medicaid Services on Friday. The rates will remain at $96.40 per month for the entirety of next year.

Medicare premiums have been on the rise for the past few years, with an increase in excess of 17% reported in 2005. This is because Medicare was forced to build reserves of funds to offset Congress-made changes that adjust physician payments. The changes are in turn intended to compensate for an antiquated and flawed payment calculation formula that leads to a reduction in physicians’ salaries each year. As of this year, reserves are finally up to the required level.

"It was painful to catch up, but now we have one year in which we can get rid of the catch-up amount and use that to offset the premium increases that otherwise would have happened," according to Medicare chief actuary Richard Foster. Next year’s increase would have otherwise been around 8.5%, Foster says.

Another reason for the absence of rate increases is the discovery of an accounting error that caused $9.3 billion in hospice payments to be taken out of Medicare’s Part B hospital fund, the one that beneficiaries pay premiums for, between 2005 and 2007. The hospice payments include outpatient doctor visits, home health services, physician-administered drugs and medical equipment. All this should have come out of Medicare hospital fund A, and fund B will be reimbursed to compensate.

The nature of these one-time changes, however, means that the rate relief will only apply to 2009, with Medicare expecting 2010 rates to rise, or as Foster put it: "Next year is going to be a little ugly, I'm afraid."