Older Americans will have to pay about 17 percent more next year - the largest increase in Medicare’s history - for their government-run health insurance, U.S. officials announced on Friday.

Starting in January, the elderly will pay $78.20 per month for non-hospital services, up $11.60 from $66.60 this year, the Centers for Medicare and Medicaid Services said. nearly $80 premium follows the largest annual hike since Medicare began nearly 40 years ago.

According to CMS records, the hike is the largest annual increase since Medicare was established nearly 40 years ago.

Most of the increase will cover the program’s new prescription drug coverage and preventive services, including an initial physical exam and other tests, said Mark McClellan, head of the federal health insurance program for the elderly and disabled.

The remaining amount, about 25 percent, will be used to help build up Medicare’s trust fund, he said, adding that the higher upfront costs will help save money elsewhere.

“Medicare beneficiaries are saving money. They’re paying a little more in premiums, but they’re getting more savings in their out-of-pocket costs as a result,” McClellan said.

But the premium increase is likely to renew controversy over the cost of the new Medicare law passed last year.

Robert Hayes, president of Medicare Rights Center, called the increase “a body blow to millions of older Americans living on fixed incomes” and blamed it on poor management.

The Congressional Budget Office estimated the bill would cost less than $400 billion over 10 years. But after the bill was signed by President George W. Bush, the administration revealed that its own expert put the cost at $534 billion.

That expert, Medicare actuary Richard Foster, also correctly forecast in March that the 2005 premiums would rise by about 17 percent.

Last year, Medicare premiums rose about 13 percent from $58.70 to $66.60, the second largest hike.

McClellan said the bill’s added coverage led to the premium increase but added that he expected next year’s increase would “not be as high as this year.”

POLITICAL IMPACT

The new law, which included optional prescription drug coverage and a formal study of drug importation, was initially thought to be a boon for Bush’s re-election efforts.

But it has faced criticism from Democrats and Republicans alike, as well as from beneficiaries who say the prescription drug card program is confusing.

Democratic presidential candidate John Kerry has blasted the new Medicare law and has called instead for cheaper drugs to be imported from Canada.

Kerry campaign spokesman Phil Singer said the increase showed that Bush had failed to contain health care costs, adding “when it comes to helping seniors, George Bush has proven that he’s taking us in the wrong direction.”

Singer and others questioned the timing of the administration’s annual announcement, which since 2001 has come in October but this year came late on Friday before the Labor Day holiday weekend and just as Hurricane Frances was hitting Florida, home to many retirees.

“We’re getting these numbers out as soon as we can,” said CMS’s McClellan, who said the increases also reflected higher health care costs in general.

David Certner, director of federal affairs for AARP, said older Americans were “picking up a significant part of the tab” of those costs. AARP is the nation’s largest organization representing the elderly.