Medicare late-signup fee already bitter pill for some

Medicare-eligible seniors who do not sign up for the new prescription drug benefit coming on line in 2006 will face penalties of 12 percent a year.

That's one of the few details available about the prescription drug benefit being added to Medicare to emerge in the months before its launch--and it feels like a threat to some seniors.

Beatrice Lumpkin, an 87-year-old grandmother from Chicago's South Shore neighborhood, says she is healthy and wants to put the projected $37-a-month fee, which adds up to $444 a year out of her fixed income, toward other expenses in the foreseeable future.

If, in three years, she decides she wants access to the drug benefit, it could cost her about $50 per month, or $600 a year.

"I just feel this penalty is blackmail and undue pressure," Lumpkin said.

Congress and the Bush administration built in a financial penalty for Lumpkin and other seniors who decide against signing up this fall for Medicare's new Part D drug coverage, saying the program needs both healthy and sick seniors if it is going to work.

It's one way to control costs in the single biggest expansion of the federal health insurance program for 41 million elderly since Medicare was created four decades ago.

The drug benefit, which is expected to provide $1,300 a year in coverage on average, is a pricey program, with costs projected at more than $720 billion during the next 10 years.

Those who skip the initial open enrollment period--Nov. 15, 2005 to May 15, 2006--would pay at least a 12 percent increase each year, raising the expected $444 base to nearly $500 with a one-year delay.

Although further details will not be available until October, health plans and pharmacies are beginning to tell seniors about the basics now. The penalty for not signing up early is among the plan's prominently mentioned features in the early marketing materials.

Seniors who do sign up will get a drug card from a third-party private company such as a health insurance plan or pharmacy benefit firm following the sign-up period for benefits slated to begin Jan. 1.

Premium costs do not include certain out-of-pocket expenses such as co-payments and deductibles, which will vary among the many private plans that will contract with Medicare.

Specific out-of-pocket costs and information on what drugs will be covered will be available in October, at the earliest, when private companies are allowed to begin marketing specific benefit features.

Health plans will make specific benefits known to the government when they sign contracts with the Medicare program in September.

Even before the details are set, seniors are turning away from the new benefit.

Lumpkin said she is leaning away from signing up because her prescription drug bill is about $1,000 a year, so she is skeptical that she will even save money by joining the new plan.

Premium pricing

If large numbers of seniors feel the same way, seniors and advocates for the elderly worry that they could end up pricing themselves out of the program if they wait to sign up for drug coverage only when they need the benefit.

"Once the cost of those premiums begins to go up, it is going up dramatically," said Terri Gendel, director of benefits and advocacy for the Oak Park-based Suburban Area Agency on Aging.

"Down the road it could price them out of a plan, depending on how much the prices go up," Gendel said.

Sydney Bild, an 83-year-old Medicare recipient from Chicago's Hyde Park neighborhood, said he knows many seniors who may not sign up in spite of the penalty, especially if they have small drug bills or none at all.

"What if a healthy senior who is on no medications and is 65 says: What the hell? I am not going to pay $37 for a prescription card when I don't take any drugs," said Bild. "Come three years later and they develop hypertension or diabetes, they are going to be penalized and pay more. That doesn't seem to be fair."

But the Bush administration and members of Congress say the penalty is needed to make the program a success.

Healthy clients needed

Although estimates vary widely from the government and health plans, the so-called "Medicare Part D" drug benefit could draw more than 20 million seniors as customers to companies that offer coverage, including 15 million to 17 million who do not have drug coverage.

Health insurance companies need a large, diverse group of seniors enrolled to spread their costs across a large number of beneficiaries and still turn a profit.

"The penalty works like any other insurance policy," said Peter Ashkenaz, spokesman for the Centers for Medicare and Medicaid Services in Washington. "If you don't take advantage of the insurance policy when it becomes available, you may have a higher premium. It's like life insurance."

Members of Congress, too, say the penalty is fair, saying it is not much different than a 10 percent annual penalty for eligible beneficiaries who do not sign up for Medicare Part B, a basic benefit under Medicare that helps cover certain physician services and outpatient expenses. The 2005 Medicare Part B premium is $78.20.

Current standard Medicare coverage also includes Medicare Part A, the hospital coverage portion, which has no premium for seniors other than certain deductibles.

"The penalty is a fair thing for everybody, and we already have it in [the existing] Medicare," said Rep. Pete Stark (D-Calif.), who opposed the overall Medicare drug benefit bill passed by Congress. "I don't have any quarrel with the penalty. The penalty is a fair thing to do to keep the program economically viable."

Still, Stark is critical of the Bush administration's effort to communicate the Medicare drug benefit to seniors, saying they should not be just now finding out about the penalty.

"The administration is trying to peddle their plan," Stark said. "I think they have an obligation to the plan and at least educate seniors as best as they can."

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bjapsen@tribune.com

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