Senators Want to Lift Medicare Drug Penalty

WASHINGTON (Reuters) – Influential senators introduced a bill on Tuesday that would waive the penalty on Americans who missed the Medicare drug coverage enrollment deadline, and said they hoped to pass the measure this week.

The deadline was on Monday, and beneficiaries who did not sign up — the administration and its critics disagree on the exact number — face a lifetime penalty.

Until this year, the federal health program for the elderly and disabled did not cover outpatient prescription drugs.

The bill to waive the penalty has bipartisan support and a chief sponsor is Iowa Republican Charles Grassley, chairman of the Senate Finance Committee and an author of the 2003 Medicare drug law.

He said he hopes to rush the legislation through the Senate this week, although he said he has not yet discussed that with the Republican leadership. The House of Representatives also would have to pass legislation.

The AARP, the influential retirees lobby which backs the drug benefit, endorsed the Grassley bill.

Health and Human Services Secretary Mike Leavitt suggested lawmakers wait until final drug plan enrollment figures are available in about a week.

"I think there would be value in waiting to see whether it’s needed. We don’t have a lot of the facts yet," Leavitt told reporters.

WHO WOULD GET PENALIZED?

Only about 1.5 million of Medicare’s 42 million patients likely would face penalties, he said. Officials expect final numbers to show about 4.5 million without drug coverage. About 3 million of those are low-income patients who would not be penalized, Leavitt said.

Even the drug benefit’s staunch backers acknowledge that the initial roll-out of the plan was rocky in January, and that many retirees were bewildered by its complexity.

"It stands to reason that it takes time for people to learn about benefits available to them," Grassley said.

Florida Democratic Sen. Bill Nelson, who had pushed fruitlessly to get the May 15 deadline extended until the end of the year, said the program was too confusing and that the new legislation "will give seniors more time to sign up without facing stiff financial penalties."

If the penalty is not waived, anyone who signs up late will face a lifetime surcharge of 1 percent of the monthly premium for the drug benefit each month. That would be a 7-percent penalty for someone who missed Monday’s deadline and then signed up in November, the next opportunity to enroll.

It would be even more for someone who enrolled later.

Grassley said the bill would make up for an estimated $1.7 billion in lost penalty revenue over five years by reducing a "stabilization fund" aimed at helping private managed-care health plans take care of older Americans.

Mark McClellan, head of the Centers for Medicare and Medicaid Services, said managed care companies are receiving smaller-than-usual increases in payments this year.

"It doesn’t seem like a good time to tighten down further on payment to those health plans that are already saving more and more seniors a lot of money," he said.