A Bush ad falsely claims that Sen. 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 percent 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 HMOs over traditional Medicare.

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 percent 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.

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 percent formula, which had been framed as a temporary measure, set to expire automatically. Had the 25 percent 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.

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, which made the 25 percent 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 percent formula to lapse. Only in that sense did Kerry vote “to require premium increases.”

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.

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.

On Sept. 5, the weekend that the Department of Health and Human Services announced the 17 percent 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 health-care spending in the coming fiscal year.

According to Jeff Lemieux, founder and executive director of Centrists.org and a former health analyst at the Congressional Budget Office, 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 percent increase in premiums, according to Medicare actuaries. The Center for Medicare and Medicaid Services estimated that the general inflation adjustment (prior to the Medicare Modernization Act) and the increased use of services would together require an increase of about 4.8 percent 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 percent 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 percent 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 health-care providers dropped out of the program altogether.

Another portion of the Bush-mandated increase is due to higher payments to HMOs 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 percent 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.

Analysis provided by FactCheck.org, a service of the Annenberg Public Policy Center of the University of Pennsylvania.