Agencies Dispute Best Timing of Refunds for Medicare’s Defunct Catastrophic Care

The Social Security Administration has asked the Treasury Department to begin issuing special refund checks in February to return $1.2 billion being collected from senior citizens even though Medicare’s catastrophic care legislation has been repealed, officials said Tuesday.

But the Treasury wants to wait until the spring to issue the money in a lump-sum payment, probably in May. Getting out the refunds each month would be a “drastic recurring increase in the workload,” according to a Treasury official.

The catastrophic care law, which required a $5.30 monthly payment by Medicare beneficiaries, was repealed in November, with benefits ending as of Jan. 1. But the premiums will continue to be deducted until May or June because Social Security cannot quickly change its complex computer programs to eliminate the monthly premium.

Social Security Commissioner Gwendolyn S. King said in an interview Tuesday that she is urging the Treasury to issue refund checks for $10.60 to Medicare beneficiaries in February, and then $5.30 in March and April and May.

The cost of preparing monthly refunds would range between $20 million and $30 million, according to two congressmen who Tuesday called for speedier return of the money.

The bureaucratic dispute arose because Social Security spends the money, but the Treasury prepares and mails the checks.

“Our whole purpose is to get the money back to people as soon as possible,” King said. The Treasury has “talked around the issue,” because it prefers doing the job later, she said. “But they haven’t said they cannot do it.”

The delay in refunding the money seems likely to become an increasing political embarrassment for both the Bush Administration and Congress, which voted overwhelmingly for repeal of the catastrophic care legislation. The bill was unpopular because it included a special surtax levied exclusively on Medicare beneficiaries.

Commissioner King announced earlier this month that the excess premiums collected could not be returned until May or later, with a single refund check that would be issued by the Treasury. She then convened a special meeting of computer experts and Social Security officials to consider various solutions and they recommended a faster refund.

But Treasury’s Financial Management Service said that it cannot handle refunds on a monthly basis. An assistant commissioner said that the service sends about 57 million checks in an average month.

“If we add an additional 28 million Social Security refunds to our monthly processing, it is clear we increase our postage and insurance costs by millions of dollars each month as well as double our workload,” he wrote in a letter to Social Security.

However, political pressure for quicker refunds is being applied.

“Senior citizens will be shocked to learn that it will take as long as six months to refund the extra charges,” Reps. David E. Bonior (D-Mich.) and Bob Wise (D-W.Va.) said in a letter to President Bush.

The government will earn interest on the $1.2 billion collected “yet no interest will be paid to the nearly 27 million Medicare beneficiaries who are being overcharged,” they said. “In the meantime, the federal government will collect more than $70 million in interest on the money they are withholding from the elderly.”

Immediate refunds should be furnished until the computer programming corrections are completed, Bonior and Wise told a news conference.

“They should not hold America’s seniors hostage to their own errors,” Wise said.

BACKGROUND

Medicare’s catastrophic care program was repealed by Congress in November and benefits end Jan. 1. However, the Social Security Administration is still deducting the catastrophic premium of $5.30 a month from retirement checks. Social Security says that its complex computer system cannot be changed so that the deductions stop until May or later.