- The Washington Times - Thursday, January 11, 2007

The late-enrollment penalty for low-income Medicare recipients who do not sign up in time for a prescription drug plan is being eliminated.

Leslie Norwalk, acting administrator of the Centers for Medicare and Medicaid, said the penalty was actually preventing low-income seniors from signing up for a drug plan.

“This is our most difficult population to reach and the one for which we continue to focus our efforts,” she said. “By removing the fear of a late fee for those who may not be able to pay, we are taking a positive step aimed at broader coverage.”

As a result, low-income Medicare recipients eligible for subsidies can enroll in a Medicare prescription drug plan with no penalty through Dec. 31, 2007. If low-income Medicare recipients do not choose a plan by then, CMS, the agency that runs the Medicare program, will automatically enroll them in a drug plan “that is most suitable for them,” according to a CMS statement.

For those Medicare recipients who do not qualify for a low-income subsidy, the penalty for signing up for a drug plan after Dec. 31 still applies. The penalty is assessed in higher monthly premium payments.

The agency last week also projected the federal cost of the Medicare prescription drug benefit from 2007 through 2016 at $964 billion, a 10 percent decrease from a July 2006 estimate of just over $1 trillion.

The new cost estimate was released just in time, as the House is set to vote on a bill that would required the Health and Human Services secretary to negotiate for lower drug prices. HHS Secretary Michael O. Leavitt said the lower estimate demonstrates that it is not necessary for Congress to pass the legislation. The House is voting on the bill today.

In related news, CMS released health care spending numbers through 2005 that show a slowdown in health care expenditures for the third year in a row. In 2005, health care spending increased by 6.9 percent, or $2 trillion, which amounts to $6,697 per person, compared with 7.2 percent growth in 2004 and 8.1 percent in 2003. The 6.9 percent growth rate is the lowest since 1999’s 6.2 percent increase.

Despite the steady slowdown, high health care costs are the primary reason 46 million Americans have no health coverage.

“Although there are many reasons why someone might not have health insurance, the high cost of coverage is the paramount factor,” said Joe Antos yesterday in testimony to the Senate health committee. “Nearly all large firms offer health benefits, but only about 60 percent of small firms offered coverage in 2006.

“Although this is good news, it is tempered by the fact that health costs continue to grow more rapidly than the economy. Over the past 35 years, health spending has grown at an average annual rate of 9.8 percent while GDP has grown at about 7.4 percent, both measured in nominal terms. In 2005, the disparity in growth rates narrowed, but health spending still outpaced the economy,” said Joe Antos, researcher at the American Enterprise Institute.

The federal government attributes a portion of the continuous slowdown in private sector health costs to prescription drugs sales. Drug sales in 2005 increased by 5.8 percent following 8.6 percent growth in 2004.

Spending on drugs has been held down in recent years by the proliferation of tiered co-payment benefit plans, which slowed the use of brand-named drugs, and a decrease in the number of new drug introductions.

Total spending for prescription drugs for the year was $200.7 billion, compared with $189.7 billion in 2004.

Hospital care accounted for the largest share of overall growth in health care spending. Spending on hospital care reached nearly $612 billion last year just slightly higher than in 2004. CMS points out that the stabilization in hospital spending in recent years, “is due in large part to hospitals’ stronger negotiating positions and their ability to pass costs on to private payers.” Consumers accounted for 43 percent of hospital spending in 2005, which is 7.6 percent more than in 2004.

Meanwhile, Medicare spending rose to $342 billion in 2005, with program expenditures on prescription drugs nearing 20 percent in 2005. Those expenditures did not include spending associated with the new drug benefit, which did not begin until 2006.

Health care runs Fridays. Contact Gregory Lopes at 202/636-4892 or [email protected]washingtontimes.com.

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