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Kerry & Bush Duel Over Medicare Premiums – Who’s To Blame For The 17% Increase?

Bush falsely claims Kerry voted repeatedly to raise premiums. Kerry's spot blaming Bush alone for the latest increase isn't much better.


A Bush ad falsely claims that Kerry “voted five times to raise Medicare premiums.” Actually, Kerry voted for maintaining the same premium formula that had been in place since well before he was elected to the Senate.

The Bush ad also falsely implies that Kerry referred to required premium increases as “a day of vindication,” when Kerry actually was referring to items such as increased health coverage for children.

Bush’s ad is meant to counter a Kerry TV spot that isn’t much better. Kerry’s ad falsely implies that Bush alone was responsible for next year’s increase in Medicare premiums. Actuaries say rising costs and other factors account for nearly half of the 17.4% increase, and have nothing to do with Bush’s Medicare legislation. And some of the costs imposed by Bush’s legislation are aimed at providing increased benefits for seniors who choose HMO’s over traditional Medicare.


Who Pays for Medicare?

Bush Ad:
“Medicare Hypocrisy”

Announcer: John Kerry…attacking the President on Medicare.

But it was Senator Kerry who voted five times to raise Medicare premiums.

Kerry voted to require premium increases…calling the passage of the bill “a day of vindication.”

The same John Kerry who was absent for 36 of 38 Medicare votes last year…even one giving seniors prescription drug coverage.

John Kerry, he actually voted for higher Medicare premiums before he came out against them.

A bit of history is in order here. The Medicare program is divided into two separate categories – Parts A and B. Part A covers hospital costs, while B includes outpatient costs and doctor bills.

Part B is optional. Those who want it must pay a premium for coverage, and 90 percent of Medicare recipients do. The government pays part of medical costs through general tax revenues, and the premiums cover the rest.

When Medicare began in 1965, patient premiums originally picked up half of the total cost of the program. But seniors complained as premiums quickly started to rise, and so Congress put a cap on the premium rates. That was replaced in 1982 when Congress set premiums at 25% of the total Part B costs, which allowed premiums to rise more quickly (and slowed the rising cost to taxpayers).  That was the situation facing Kerry when he joined the Senate in 1985.

Five Votes to Increase Premiums?

The Bush ad claims Kerry voted “five times to raise Medicare premiums.”  But as evidence, the campaign cites five votes on large appropriations bills. Among the provisions of these spending bills were extensions of the 25% formula, which had been framed as a temporary measure, set to expire automatically. Had the 25% formula not been extended, premiums would have been lower and payments by taxpayers higher.

Four of these measures passed with broad bipartisan support, including three in which a majority of Republican senators joined in support. The only one of the five votes that wasn’t bipartisan was on President Clinton’s 1993 deficit-reduction legislation raising the top federal income-tax rates and cutting spending. Extending the Medicare formula was an almost unnoticed feature of that landmark legislation, which passed without a single Republican vote in favor.

Saying these five votes were “to raise Medicare premiums” is incorrect. They were votes to maintain the formula for determining premiums as it was. The Bush ad would be correct to say that Kerry voted against allowing Medicare premiums to fall (and the burden on taxpayers to rise) — but then so did most Republicans, most of the time.

“A Day of Vindication?”

The Bush ad strikes another false note when it says, “Kerry voted to require premium increases…calling the passage of the bill ‘a day of vindication.'” This is extremely misleading and quotes Kerry out of context.

The ad refers to the Balanced Budget Act of 1997 (BBA), which made the 25% formula permanent so that Congress would not have to continually renew the rate.

It passed overwhelmingly, 85-15, with most Republicans in favor.

It is true that premium costs would have fallen had Congress allowed the 25% formula to lapse, reverting to a formula that would have decreased premiums and increased the expense to taxpayers. Only in that sense did Kerry vote “to require premium increases.” Jeff Lemieux, founder and executive director of Centrists.org and a former health analyst at the Congressional Budget Office, told FactCheck.org:

Lemieux: Technically, they (the Bush campaign) are right. Premiums would have been lower if they didn’t pass BBA ’97. However, no one expected this to happen.

The Bush ad goes off the track when it implies that Kerry called the mandated premium increases a “day of vindication,” which is not what he was referring to in his speech on the Senate floor that day.  Here is what he really said:

Kerry: This legislation before us now incorporates many of the provisions I and others on this side of the aisle fought to have included.  For that reason, this is a day of vindication for Americans who believe, as Democrats have proven, that it is vital to balance the federal budget and extend health care to children, provide broader educational opportunities, ensure the future for our senior citizens and safeguard our environment.

Notice that Kerry referred specifically to the overall effort to balance the budget, and also to items that Democrats had wanted included: “health care to children” and “broader educational opportunities.” He made no reference to Medicare premiums.

Bush’s Medicare Modernization Act of 2003

Kerry Ad:
“Immediate Help”

Announcer: George Bush touting his Medicare bill to the nation.

President Bush: “I believe we have a moral responsibility to honor America’s seniors. Now seniors are getting immediate help…”

Announcer: The very next day, George Bush imposes the biggest Medicare premium increase in history, while prescription drug costs still skyrocket. The wrong direction for America.

(On Screen: “Medicare Premiums to Rise Record 17%” Charlotte Observer – 9/4/04; “Medicare Recipients Face Steep Rise in Premiums” Hartford Courant – 9/4/04; “Drug Prices Sour” UPI 7/9/04)

Announcer: John Kerry. A plan to lower the cost of health care and take America in a new direction.

The Bush ad says Kerry missed 36 out of 38 Medicare votes in 2003 including “one giving seniors prescription drug coverage.” That’s true: Kerry was campaigning during most of the votes on Bush’s Medicare bill in 2003, and he did miss the final vote on the Medicare Modernization Act (MMA) that passed 54-44 and extended prescription drug benefits to seniors. Kerry would have voted against it, making the vote 54-45.

The ad fails to mention that Kerry was present for a key vote on the bill that took place a day earlier, when his vote was much more likely to make a difference.This was a procedural vote to waive budget restrictions – since MMA would violate Congressional spending rules – and therefore it required 60 votes to pass as opposed to a simple majority. Kerry was present this time and voted against the motion, but it passed 61-39. Had only two senators voted differently, MMA would not have been brought to the final vote.

Bush and the 17% Premium Increase

On September 5, the weekend that the Department of Health and Human Services announced the 17% hike in Medicare premiums, the Kerry campaign released an ad that said Bush “imposes the biggest Medicare premium increase in history.” Their facts are correct – this year will be the biggest increase in Medicare premiums since the program began. However, Bush didn’t “impose” the increase unilaterally, as the ad claims. The increase was announced as part of the annual HHS cost estimate for projected healthcare spending in the coming fiscal year. Lemieux, the health analyst, told FactCheck.org:

Lemieux: It is just wrong to say that Kerry is responsible for the increase, and it may be a bit of a stretch to blame this on Bush, since it is not explicitly his doing .

HHS bases the estimate on the previous year’s expenditures, and then factors in any new changes while accounting for the overall inflated cost of healthcare. This year’s estimate for 2005 reflects the changes in spending that resulted from the President’s Medicare bill, and also from other factors.

Bush’s Medicare bill does account for 9.9 percentage points of the total 17.4% increase in premiums, according to Medicare actuaries. The Center for Medicare and Medicaid Services estimated that the general inflation adjustment (prior to the MMA) and the increased use of services would together require an increase of about 4.8% in premiums. Other factors include replenishing reserve funds drawn down by higher-than-expected costs in the past.
A large part of the Bush-mandated premium increase goes to provide a very small increase in fees for physicians — just a 1% rise, much lower than the overall rate of inflation. It looms much larger in the accounting, however, because the law prior to MMA would have imposed a 4% cut in fees. So Bush’s law gets the blame for reversing that fee cut as well as allowing a modest increase for doctors.

Congress increased payments to doctors to address a problem created by the 1997 Balanced Budget Act, which had slowed the growth of costs (and premiums) by severely restricting payments to physicians and other providers of health care. But a consequence of the cuts was that a number of doctors and healthcare providers dropped out of the program altogether.

Another portion of the Bush-mandated increase is due to higher payments to HMO’s offering alternatives to traditional Medicare under so-called “Medicare Advantage” plans. Administration officials argue that these payments will lead to increased benefits for those who choose the plans, while Democrats argue that this will “force” seniors into HMOs.

None of the 17% increase is due to drug benefits. A big part of President Bush’s Medicare bill creates for the first time a prescription drug benefit plan for seniors.  The plan does not take effect until 2006, but even then it will not have any impact on the Part B premiums.The prescription drug program will fall under a new section, Part D, which will have its own premium rates worked out through private insurers.



Watch Bush Ad: “Medicare Hypocrisy”

Watch Kerry Ad: “Immediate Help”


Supporting Documents

View Full Statement of Kerry’s “Day of Vindication”


Julie Rovner, “Bush, Kerry Debate Medicare Price Hike,” NPR News, 13 September 2004.

Julie Rovner, “Medicare Officials Announce Largest Increase in Premiums in Program’s History,” NPR News, 3 September 2004.

“Medicare Increases Prove To Be Complicated Political Fodder,” National Journal’s Congress Daily, 9 September 2004.

US Senate Roll Call Votes 97th Congress – 1st Session H.R 3198 Vote #379 19 December 1985.

US Senate Roll Call Votes 99th Congress – 1st Session H.R. 3545 Vote #419 21 December 1987.

US Senate Roll Call Votes 101st Congress – 1st Session H.R. 3299 Vote #243  13 October 1989.

US Senate Roll Call Votes 103rd Congress – 1st Session H.R. 2264 Vote #247  6 August 1993.

US Senate Roll Call Votes 105th Congress – 1st Session H.R. 2015 Vote #209  31 July 1997.

Jeff Lemieux, Centrists.org, personal interview 14 September 2004.

John Shatto, Office of the Actuary, Center for Medicare & Medicaid Services, personal interview 14 September 2004.