February 7, 2008

Income relating part d premiums will create costly problems for medicare beneficiaries

President Bush's proposed fiscal year 2009 budget calls for the "modernization and improvement of Medicare."  Among many troubling provisions, the budget proposes the establishment of an income-related Part D premium structure, similar to the income-related Part B premium. The President's budget would have each Part D plan charge enrollees a premium based not only on the bid submitted by the plan, but also based on the income of each enrollee.  Each plan would have different premium amounts for different enrollees.

Unfortunately, this proposal will not modernize or improve Medicare for beneficiaries. As hundreds of thousands of Medicare beneficiaries can attest, the Centers for Medicare & Medicaid Services (CMS), the Social Security Administration (SSA) and the Internal Revenue Services (IRS) cannot, even under the current system, accurately determine the Part D premiums that beneficiaries are required to pay.[1]  Yet the system envisioned in the President's budget would be even more complex than the current system.

Problems withholding Part D premiums from individual's Social Security have fallen into four categories:

• Failure  to withhold premiums at all;
• Failure to cease withholding premiums;
• Failure to withhold the correct amount in premiums;
• Failure to forward deducted premiums to the proper Part D plan.

These problems have resulted in Part D plan enrollees:

• Being charged a premium even though they are eligible for the Part D low-income subsidy and are not required to pay a premium;
• Having more deducted from their Social Security check than they can afford;
• Waiting a long time to receive refunds of incorrectly withheld amounts;
• Having to effectively pay two premiums each month to maintain their coverage;
• Being dunned for several months' worth of premiums in one or two benefit payments;
• Receiving bills and collection notices for several months' worth of premiums; and
• In some cases being retroactively disenrolled from their Part D plans.

These problems stem from:

• Poor coordination of premium data exchange between plans and CMS;

• Errors in the reporting and inputting of premium data into CMS database;

• Infrequent exchanges of premium data between CMS and SSA;

• Ineffective response to premium error complaints made by beneficiaries; and

• Inadequate staffing to resolve premium discrepancies.

Income-relating Part D premiums will require proof, confirmation, and multiple data exchanges among three governmental agencies - CMS, SSA, and IRS - and the almost 2,000 Part D plans nationwide. Based on Medicare beneficiaries' experience to date, it is fair to assume that it would greatly exacerbate current problems, and create new ones, if another level of premium calculation is added.

Additionally, State Health Insurance Assistance Programs (SHIPs) already have difficulty assisting beneficiaries to choose the Part D plan that is most appropriate for them.  There are too many plans, with too many different variables, including premium, deductible, coverage gap, formulary, and utilization management requirements for formulary drugs.  The President's budget unwisely adds another variable based on income, making premium calculations more difficult.

The Part D program would be improved and made less complicated if the program were offered through Medicare and not through private insurance companies.  The cost savings to beneficiaries, their families and their advocates, as well as to the Medicare program itself, would exceed any savings from implementation of an income related Part D premium structure.

For more information, contact attorney Vicki Gottlich
(vgottlich @ medicareadvocacy.org) at 202-293-5760 or attorney Wey-Wey Kwok
(wkwok @ medicareadvocacy.org).  Remove spaces in email addresses.

Copyright © 2008 Center for Medicare Advocacy, Inc.