Increase in Medicare Part D Premiums Could Lead to Reduced Social Security Benefits, Report Finds
The new Medicare prescription drug benefit could result in a reduction in Social Security payments to beneficiaries, according to a report released Wednesday by Democrats on the Joint Economic Committee, the Washington Times reports (DeBose, Washington Times, 7/22). Medicare beneficiaries' premiums for Part B, which covers physician and outpatient care, cannot rise above annual cost-of-living increases in their Social Security benefits; however, the same protection was not included for premiums under the new Medicare Part D, which will cover prescription drug costs beginning in 2006, according to the AP/San Francisco Chronicle.
The JEC report says, "Seniors are exposed to the possibility that large increases in medical costs, especially prescription drug costs, could eat up a large piece of their Social Security COLA and, for some, even reduce the size of their Social Security check" (Sherman, AP/San Francisco Chronicle, 7/22). According to Rep. Pete Stark (D-Calif.), ranking member of the JEC, COLA adjustments for about two-thirds of Medicare beneficiaries would be reduced as a result of premium increases for Part B and D, with those having the lowest incomes most affected. He said that Social Security checks themselves would be reduced for about 2% of beneficiaries because the Part D premium increases would be larger than the entire COLA, according to CongressDaily (Rovner, CongressDaily, 7/21).
The law ties Part D premium increases to drug price inflation, while Social Security COLA increases are tied to the overall rate of inflation, the AP/Chronicle reports. According to the AP/Chronicle, drug prices have risen faster than the Consumer Price Index (AP/San Francisco Chronicle, 7/21).
House and Senate Democrats on Wednesday unveiled legislation that would guarantee beneficiaries could retain at least 75% of their Social Security COLA each year, regardless of increases for Medicare Part B and D premiums, CongressDaily reports. The bill would cost $27 billion over the next 10 years, according to informal estimates.
Senate Minority Leader Tom Daschle (D-S.D.), who released the report in a news conference with House Minority Leader Nancy Pelosi (D-Calif.), said, "It is a serious mistake that needs to be remedied quickly" (CongressDaily, 7/21). Pelosi called the Medicare law a "cruel hoax," adding that Democrats are working to replace the new law with legislation that would allow the HHS secretary to negotiate lower drug prices with pharmaceutical companies (Washington Times, 7/22).
Rep. Nancy Johnson (R-Conn.) said lawmakers could fix the problem, noting, "If we need to deal with that, we will." Rep. Jo Ann Emerson (R-Mo.) said that reductions in COLA "would be a huge problem" for her constituents, who "would be up in arms if they knew" about the situation (Rovner, CongressDaily, 7/22).
Sen. Chuck Grassley (R-Iowa) said that Democrats' analysis of the situation "is flawed," noting that it does not account for COLA increases over the next 10 years, which will be "much larger" than any premiums for Part B and D benefits combined in 2004. He added that because the Medicare law was passed after the start of fiscal year 2004 and has yet to be fully implemented, factoring in COLA based on today's premiums is premature, the Times reports.
CMS Administrator Mark McClellan said, "If not for the new Medicare law, seniors without drug coverage would continue to pay the highest prices for their medicines. For the first time, all beneficiaries will have guaranteed access to Medicare drug coverage." He added that 33% of all beneficiaries with low incomes will pay low or no premiums or deductibles for Part D (Washington Times, 7/22). He also said that for most Medicare beneficiaries, the increase in drug benefits is "far greater than the new out-of-pocket costs [they] will pay." HHS spokesperson Bill Pierce said that Democrats are "trying to keep this bill spinning" (CongressDaily, 7/22).