Federal Register, Volume 85 Issue 219 (Thursday, November 12, 2020)

[Federal Register Volume 85, Number 219 (Thursday, November 12, 2020)]
[Notices]
[Pages 71904-71913]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-25029]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-8076-N]
RIN 0938-AU16

Medicare Program; Medicare Part B Monthly Actuarial Rates,
Premium Rates, and Annual Deductible Beginning January 1, 2021

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, 2021. In addition, this notice announces the
monthly premium for aged and disabled beneficiaries, the deductible for
2021, 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 2021 are $291.00 for
aged enrollees and $349.90 for disabled enrollees. The standard monthly
Part B premium rate for all enrollees for 2021 is $148.50, 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 the $3.00 repayment amount required
under current law. (The 2020 standard premium rate was $144.60, which
included the $3.00 repayment amount.) The Part B deductible for 2021 is
$203.00 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 premium and related amounts announced in this notice are
effective on January 1, 2021.

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 2021
Part B deductible is calculated by multiplying the 2020 deductible by
the ratio of the 2021 aged actuarial rate to the 2020 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 the two groups 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

[[Page 71905]]

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 2021, $88,000 for a
beneficiary filing an individual income tax return and $176,000 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 in 2018, and section 53114 of the
Bipartisan Budget Act of 2018 (BBA of 2018) (Pub. L. 115-123) further
modified the income thresholds beginning in 2019. For years beginning
in 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 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 increase in the premium. Specifically, the
reduction in the premium amount applies if the individual is entitled
to

[[Page 71906]]

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 forgone
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.
Similarly, section 1839 of the Act, as amended by section 2401 of
the Continuing Appropriations Act, 2021 and Other Extensions Act (Pub.
L. 116-159), specifies that the 2021 actuarial rate for enrollees age
65 and older be determined as the sum of the 2020 actuarial rate for
enrollees age 65 and older and one-fourth of the difference between the
2020 actuarial rate and the preliminary 2021 actuarial rate (as
determined by the Secretary of HHS) for such enrollees. The premium
revenue lost by using the resulting lower premium (excluding the
forgone income-related premium revenue) will be replaced by a transfer
of general revenue from the Treasury, which will be repaid over time.
Starting in 2016, in order to repay the balance due (which includes
the transfer amounts and the forgone income-related premium revenue
from the Bipartisan Budget Act of 2015 and the Continuing
Appropriations Act, 2021 and Other Extensions Act), 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 will be paid back to the general fund of the Treasury, and
they 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 balance due is
zero. (In the final year of the repayment, the additional amounts may
be modified to avoid an overpayment.) The repayment amounts (excluding
those for high-income enrollees) are subject to the hold-harmless
provision. The original balance due was $9,066,409,000, consisting of
$1,625,761,000 in forgone income-related premium revenue plus a
transfer amount of $7,440,648,000 from the provisions of the Bipartisan
Budget Act of 2015. The increase in the balance due in 2021 will be
$8,799,829,000, consisting of $946,046,000 in forgone income-related
premium income plus a transfer amount of $7,853,783,000 from the
provisions of the Continuing Appropriations Act, 2021 and Other
Extensions Act. An estimated $6,761,022,000 will have been collected
for repayment to the general fund by the end of 2020.

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 2021 are
$291.00 for enrollees age 65 and over and $349.90 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 2021 is
$148.50.
The following are the 2021 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.

[[Page 71907]]

Greater than $111,000 and less Greater than 148.50 297.00
than or equal to $138,000. $222,000 and
less than or
equal to
$276,000.
Greater than $138,000 and less Greater than 237.60 386.10
than or equal to $165,000. $276,000 and
less than or
equal to
$330,000.
Greater than $165,000 and less Greater than 326.70 475.20
than $500,000. $330,000 and
less than
$750,000.
Greater than or equal to Greater than or 356.40 504.90
$500,000. equal to
$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:

------------------------------------------------------------------------
Income-
Beneficiaries who are married and lived with related Total
their spouses at any time during the year, but monthly monthly
who file separate tax returns from their adjustment premium
spouses: amount amount
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Less than or equal to $88,000................... $0.00 $148.50
Greater than $88,000 and less than $412,000..... 326.70 475.20
Greater than or equal to $412,000............... 356.40 504.90
------------------------------------------------------------------------

The Part B annual deductible for 2021 is $203.00 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 2021

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.
Because the premium rates are established prospectively, they are
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. Trust fund assets must
therefore 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. For 2021, the four most important
of these factors are (1) the impact of the COVID-19 pandemic on program
spending; (2) the difference from prior years between the actual
performance of the program and estimates made at the time financing was
established; (3) 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 (4) the expected relationship between incurred and cash
expenditures. The first factor, the impact of the pandemic on program
spending, brings a higher-than-usual degree of uncertainty to projected
costs for the 2021 Part B financing. The other three 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 2019 and 2020.

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
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Assets less
Financing period ending Assets (in Liabilities liabilities
millions) (in millions) (in millions)
----------------------------------------------------------------------------------------------------------------
December 31, 2019............................................... $99,602 $31,566 $68,036
December 31, 2020............................................... 123,051 32,884 90,167
----------------------------------------------------------------------------------------------------------------

[[Page 71908]]

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.
Section 1839 of the Act, as amended by section 2401 of the
Continuing Appropriations Act, 2021 and Other Extensions Act (Pub. L.
116-159), specifies that the 2021 monthly actuarial rate for enrollees
age 65 and older be determined as the sum of the 2020 monthly actuarial
rate for enrollees age 65 and older and one-fourth of the difference
between the 2020 monthly actuarial rate and the preliminary 2021
monthly actuarial rate (as determined by the Secretary of HHS) for such
enrollees. The premium revenue lost by using the resulting lower
premium (excluding the forgone income-related premium revenue) will be
replaced by a transfer of general revenue from the Treasury, which will
be repaid over time.
The preliminary monthly actuarial rate for enrollees age 65 and
older for 2021 is determined by first establishing per enrollee costs
by type of service from program data through 2020 and then projecting
these costs for subsequent years. The projection factors used for
financing periods from January 1, 2018 through December 31, 2021 are
shown in Table 2. The 2020 monthly actuarial rate for enrollees age 65
and older is $283.20, and the preliminary 2021 monthly actuarial rate
for enrollees age 65 and older is $314.30. In accordance with the
provisions of the Continuing Appropriations Act, 2021 and Other
Extensions Act, the 2021 monthly actuarial rate for enrollees age 65
and older is $291.00 ($283.20 + 0.25 x (314.30-283.20)).
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 2021 is $307.52. Based on current
estimates, the assets at the end of 2020 are not sufficient to cover
the amount of incurred, but unpaid, expenses, to provide for
substantial variation between actual and projected costs, and to
accommodate the unusually high degree of uncertainty due to the COVID-
19 pandemic. Thus, a positive contingency margin is needed to increase
assets to a more appropriate level. The preliminary monthly actuarial
rate of $314.30 provides an adjustment of $8.17 for a contingency
margin and -$1.39 for interest earnings.
The contingency margin for 2021 is affected by several factors.
First, in response to the pandemic, about $43 billion was paid out of
the Part B account as part of the Accelerated and Advanced Payment
(AAP) programs. Providers are to repay their AAP payments to Part B
over time through reduced Part B claims payments. However, until the
AAP payments have been repaid, the Part B account would not have the
roughly $43 billion in assets, and the financing for 2021 would need to
be increased to restore the assets used to make these payments. The
Continuing Appropriations Act, 2021 and Other Extensions Act requires
that a transfer be made from the Treasury to Part B to restore the
roughly $43 billion in AAP payments paid out and specifies that any
future AAP provider repayments be transferred to the Treasury. Because
the 2021 Part B financing includes the assumption that roughly $43
billion will be transferred from the Treasury to Part B before the end
of calendar year 2020, the AAP payments do not impact contingency
margin.
Second, in order to take into account the uncertainty and potential
impact of the COVID-19 pandemic, assumptions were developed for testing
and treatment for COVID-19, utilization of non-COVID-related care,
potential costs for COVID-19 vaccines, and possible paths of the
pandemic. Several Part B pandemic cost scenarios were developed based
on these assumptions. The difference between the best-estimate pandemic
scenario and the highest-cost pandemic scenario was used to establish
the additional contingency margin needed to account for the potential
costs and uncertainty from the pandemic.
Third, 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 2021, the total of these brand-name drug fees is
estimated to be $2.8 billion. The contingency margin for 2021 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. The financing rates for 2021 are set
above the normal target due to the higher-than-usual uncertainty for
2021. The actuarial rate of $291.00 per month for aged beneficiaries,
as announced in this notice for 2021, reflects the combined effect of
the factors and legislation 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 2021 is $377.23. The monthly actuarial rate of
$349.90 also provides an adjustment of -$1.61 for interest earnings and
-$25.72 for a contingency margin, reflecting the same factors and
legislation 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. As noted for the aged
actuarial rate, the 2021 contingency margin is set above the normal
target level in order to accommodate the higher uncertainty due to the
COVID-19 pandemic.
The actuarial rate of $349.90 per month for disabled beneficiaries,
as announced in this notice for 2021, reflects the combined net effect
of the factors and legislation 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

[[Page 71909]]

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. The historical variation may not be
representative of the current level of uncertainty due to the COVID-19
pandemic.
As indicated in Table 5, the monthly actuarial rates would result
in an excess of assets over liabilities of $101,796 million by the end
of December 2021 under the cost growth rate assumptions shown in Table
2 and under the assumption that the provisions of current law are fully
implemented. This result amounts to 21.6 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 $65,262 million by the end of December 2021 under
current law, which amounts to 12.4 percent of the estimated total
incurred expenditures for the following year. Under fairly optimistic
assumptions, the monthly actuarial rates would result in a surplus of
$176,475 million by the end of December 2021, or 34.2 percent of the
estimated total incurred expenditures for the following year.
The sensitivity analysis indicates that, in a typical year, the
premium and general revenue financing established for 2021, together
with existing Part B account assets, would be adequate to cover
estimated Part B costs for 2021 under current law, should actual costs
prove to be somewhat greater than expected. However, the current level
of uncertainty due to the pandemic may differ from the historical
variation included in this analysis.
5. Premium Rates and Deductible
As determined in accordance with section 1839 of the Act, the
following are the 2021 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-
Beneficiaries who file Beneficiaries related Total
individual tax returns with who file joint monthly monthly
income: tax returns with adjustment premium
income: amount amount
------------------------------------------------------------------------
Less than or equal to $88,000. Less than or $0.00 $148.50
equal to
$176,000.
Greater than $88,000 and less Greater than 59.40 207.90
than or equal to $111,000. $176,000 and
less than or
equal to
$222,000.
Greater than $111,000 and less Greater than 148.50 297.00
than or equal to $138,000. $222,000 and
less than or
equal to
$276,000.
Greater than $138,000 and less Greater than 237.60 386.10
than or equal to $165,000. $276,000 and
less than or
equal to
$330,000.
Greater than $165,000 and less Greater than 326.70 475.20
than $500,000. $330,000 and
less than
$750,000.
Greater than or equal to Greater than or 356.40 504.90
$500,000. equal to
$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:

Table 2--Projection Factors \1\ 12-Month Periods Ending December 31 of 2018-2021
[In percent]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Other
Physicians' Durable Carrier Physician- carrier Outpatient Home Hospital Other Managed
Calendar year services medical lab \2\ administered services hospital health lab \4\ intermediary care
equipment drugs \3\ agency services \5\
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Aged:
2018.......................................................... 1.6 18.1 11.4 12.2 2.3 8.4 1.4 -1.0 7.6 7.4
2019.......................................................... 3.8 7.3 4.3 11.0 2.2 5.6 3.9 -3.6 5.5 8.4
2020.......................................................... -14.0 -1.5 -13.5 6.3 -5.8 -6.5 -3.7 -7.0 -3.7 8.5
2021.......................................................... 29.3 0.5 17.7 9.6 14.9 36.6 19.0 8.8 15.0 3.6
Disabled:
2018.......................................................... -0.6 13.5 3.7 7.9 1.9 4.8 0.5 -1.3 5.3 7.6
2019.......................................................... 5.5 5.4 10.4 12.0 5.8 7.3 3.7 0.6 11.1 8.3
2020.......................................................... -9.3 0.3 -15.2 11.5 1.6 -3.7 -1.5 -3.8 -0.6 9.5
2021.......................................................... 24.7 1.5 23.0 8.9 8.8 34.9 22.4 6.8 22.2 3.0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\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.

[[Page 71910]]

\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, 2018 Through December 31, 2021
----------------------------------------------------------------------------------------------------------------
Preliminary CY
CY 2018 CY 2019 CY 2020 2021 CY 2021
----------------------------------------------------------------------------------------------------------------
Covered services (at level
recognized):
Physician fee schedule...... $72.28 $73.02 $60.48 $76.83 $76.83
Durable medical equipment... 6.05 6.32 5.99 5.93 5.93
Carrier lab \1\............. 4.28 4.35 3.61 4.19 4.19
Physician-administered drugs 16.07 17.37 17.74 19.92 19.92
Other carrier services \2\.. 9.33 9.28 8.41 9.52 9.52
Outpatient hospital......... 49.46 50.84 45.71 61.52 61.52
Home health................. 8.85 8.95 8.29 9.72 9.72
Hospital lab \3\............ 2.17 2.04 1.82 1.95 1.95
Other intermediary services 18.61 19.13 17.70 20.06 20.06
\4\........................
Managed care................ 100.65 113.46 129.87 137.11 137.11
-------------------------------------------------------------------------------
Total services.......... 287.76 304.75 299.62 346.77 346.77
Cost sharing:
Deductible.................. -6.40 -6.32 -6.74 -6.94 -6.94
Coinsurance................. -28.62 -28.79 -26.02 -30.36 -30.36
Sequestration of benefits....... -5.05 -5.39 -1.78 -6.17 -6.17
HIT payment incentives.......... 0.16 0.00 0.00 0.00 0.00
-------------------------------------------------------------------------------
Total benefits.............. 247.85 264.26 265.07 303.30 303.30
Administrative expenses......... 3.90 4.11 4.71 4.21 4.21
-------------------------------------------------------------------------------
Incurred expenditures........... 251.75 268.36 269.79 307.52 307.52
Value of interest............... -1.80 -1.88 -1.09 -1.39 -1.39
Contingency margin for 11.95 -1.58 14.50 8.17 -15.13
projection error and to
amortize the surplus or deficit
\5\............................
-------------------------------------------------------------------------------
Monthly actuarial rate...... $261.90 $264.90 $283.20 $314.30 $291.00
----------------------------------------------------------------------------------------------------------------
\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.
\5\ The significant negative margin included in the 2021 actuarial rate is attributable to the application of
the provisions of the Continuing Appropriations Act, 2021 and Other Extensions Act.

Table 4--Derivation of Monthly Actuarial Rate for Disabled Enrollees for Financing Periods Ending December 31,
2018 Through December 31, 2020
----------------------------------------------------------------------------------------------------------------
CY 2018 CY 2019 CY 2020 CY 2021
----------------------------------------------------------------------------------------------------------------
Covered services (at level recognized):
Physician fee schedule...................... $73.05 $72.63 $61.25 $72.93
Durable medical equipment................... 12.09 12.02 11.02 10.81
Carrier lab \1\............................. 5.71 6.00 4.73 5.51
Physician-administered drugs................ 14.80 15.54 15.84 17.51
Other carrier services \2\.................. 12.32 12.38 11.70 12.20
Outpatient hospital......................... 65.16 65.53 57.86 75.43
Home health................................. 6.95 6.78 6.19 7.20
Hospital lab \3\............................ 2.61 2.48 2.21 2.26
Other intermediary services \4\............. 50.78 52.79 51.68 53.18
Managed care................................ 103.40 124.70 154.31 168.50
---------------------------------------------------------------
Total services.......................... 346.87 370.84 376.79 425.52
Cost sharing:
Deductible.................................. -6.16 -6.05 -6.45 -6.65
Coinsurance................................. -41.95 -41.78 -38.85 -41.50
Sequestration of benefits....................... -5.97 -6.45 -2.21 -7.53
HIT payment incentives.......................... 0.16 0.00 0.00 0.00
---------------------------------------------------------------
Total benefits.............................. 292.95 316.56 329.29 369.85
Administrative expenses......................... 4.60 4.92 7.89 7.38
---------------------------------------------------------------
Incurred expenditures........................... 297.55 321.48 337.15 377.23
Value of interest............................... -2.68 -2.52 -1.38 -1.61

[[Page 71911]]

Contingency margin for projection error and to 0.13 -3.56 7.83 -25.72
amortize the surplus or deficit \5\............
---------------------------------------------------------------
Monthly actuarial rate...................... $295.00 $315.40 $343.60 $349.90
----------------------------------------------------------------------------------------------------------------
\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.
\5\ The significant negative margin included in the 2021 actuarial rate is attributable to the application of
the provisions of the Continuing Appropriations Act, 2021 and Other Extensions Act.

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, 2021
----------------------------------------------------------------------------------------------------------------
As of December 31, 2019 2020 2021
----------------------------------------------------------------------------------------------------------------
Actuarial status (in millions):
Assets...................................................... $99,602 $123,051 $138,974
Liabilities................................................. $31,566 $32,884 $37,178
-----------------------------------------------
Assets less liabilities..................................... $68,036 $90,167 $101,796
Ratio \1\................................................... 17.7% 20.2% 21.6%
Low-cost projection:
Actuarial status (in millions):
Assets.................................................. $99,602 $144,338 $176,457
Liabilities............................................. $31,566 $30,519 $35,245
-----------------------------------------------
Assets less liabilities................................. $68,036 $113,819 $141,212
Ratio \1\............................................... 18.9% 28.2% 34.2%
High-cost projection:
Actuarial status (in millions):
Assets.................................................. $99,602 $101,797 $104,088
Liabilities............................................. $31,566 $35,245 $38,826
-----------------------------------------------
Assets less liabilities................................. $68,036 $66,552 $65,262
Ratio \1\............................................... 16.7% 13.7% 12.4%
----------------------------------------------------------------------------------------------------------------
\1\ Ratio of assets less liabilities at the end of the year to the total incurred expenditures during the
following year, expressed as a percent.

III. 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
(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 2021 standard Part B premium of $148.50 is $3.90 higher than
the 2020 premium of $144.60. We estimate that this premium increase,
for the approximately 59 million Part B enrollees in 2021, 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 2021 are $291.00 for enrollees age 65
and over and $349.90 for disabled enrollees under age 65. It also
announces the 2021 monthly Part B premium rates to be paid by

[[Page 71912]]

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.

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, 2021. 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 2020,
that threshold is approximately $156 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 2021 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 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

[[Page 71913]]

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 that 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; since 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, 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 and
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 2021. 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 30, 2020.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
Dated: November 2, 2020.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2020-25029 Filed 11-6-20; 4:15 pm]
BILLING CODE 4120-01-P