Social Security Administration: Short Time Frame and Workload	 
Challenges Could Affect Timely Implementation of Income-Based	 
Medicare Part B Premiums (17-NOV-06, GAO-07-228R).		 
                                                                 
Beginning January 1, 2007, the premiums for the Medicare Part B  
Supplementary Medical Insurance program will be based on income, 
which will raise the premiums for approximately 1.65 million	 
higher-income beneficiaries to as much as 80 percent of the full 
cost over the 3-year phase-in period. This change, which may be  
unknown to some beneficiaries, will affect single individuals	 
with incomes over $80,000 and married couples who file jointly	 
with incomes over $160,000. Medicare Part B is a voluntary	 
program administered by the Centers for Medicare & Medicaid	 
Services (CMS) that covers doctors' services, certain outpatient 
services, and other care. Currently, Medicare Part B		 
beneficiaries generally pay a flat premium of 25 percent (the	 
standard monthly premium) of the cost of the program, with the	 
remaining 75 percent subsidized by the federal government. While 
CMS administers the program, the Social Security Administration  
(SSA) is responsible for determining and assessing Medicare Part 
B income-based premiums once CMS has set the standard premium	 
amount for the year. To better understand how SSA is implementing
such premiums, the Senate Committee on Finance requested that we 
review the process that SSA has established to determine and	 
assess the new premiums.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-228R					        
    ACCNO:   A63511						        
  TITLE:     Social Security Administration: Short Time Frame and     
Workload Challenges Could Affect Timely Implementation of	 
Income-Based Medicare Part B Premiums				 
     DATE:   11/17/2006 
  SUBJECT:   Beneficiaries					 
	     Cost analysis					 
	     Medicare						 
	     Policy evaluation					 
	     Price adjustments					 
	     Statistical data					 
	     Policies and procedures				 
	     Medicare Supplemental Medical Insurance		 
	     Program						 
                                                                 

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GAO-07-228R

November 17, 2006

The Honorable Charles E. Grassley Chairman The Honorable Max Baucus
Ranking Minority Member Committee on Finance United States Senate

Subject: Social Security Administration: Short Time Frame and Workload
Challenges Could Affect Timely Implementation of Income-Based Medicare
Part B Premiums

Beginning January 1, 2007, the premiums for the Medicare Part B
Supplementary Medical Insurance program will be based on income, which
will raise the premiums for approximately 1.65 million higher-income
beneficiaries to as much as 80 percent of the full cost over the 3-year
phase-in period. This change, which may be unknown to some beneficiaries,
will affect single individuals with incomes over $80,000 and married
couples who file jointly with incomes over $160,000. Medicare Part B is a
voluntary program administered by the Centers for Medicare & Medicaid
Services (CMS) that covers doctors' services, certain outpatient services,
and other care. Currently, Medicare Part B beneficiaries generally pay a
flat premium of 25 percent (the standard monthly premium) of the cost of
the program, with the remaining 75 percent subsidized by the federal
government. While CMS administers the program, the Social Security
Administration (SSA) is responsible for determining and assessing Medicare
Part B income-based premiums once CMS has set the standard premium amount
for the year. To better understand how SSA is implementing such premiums,
the Senate Committee on Finance requested that we review the process that
SSA has established to determine and assess the new premiums.

Enclosed (Enclosure I) is an updated version of the briefing that we
provided to your staff on November 7, 2006 describing the status of SSA's
implementation efforts as of November 6, 2006. At this writing, SSA is
still in the process of calculating premiums and expects to finish this
task by mid-November. Once the calculations are completed, SSA will
include the new premium in its cost of living adjustment notices, which
will be mailed to affected beneficiaries in late November. Beneficiaries
will have 60 days after receiving the notice of the premium increase to
file an appeal. However, they may also request a new determination without
filing an appeal if they have experienced a life changing event that
results in a significant reduction in their income, or they have more
recent, amended or corrected tax return information. Time frames for
requesting new determinations vary depending on the reason that
beneficiaries cite for making such a request. SSA is conducting a number
of training efforts to assist staff in dealing with inquiries from
affected beneficiaries. For field offices with a high volume of affected
beneficiaries, SSA plans to move the resulting work as needed to offices
with fewer affected beneficiaries. Despite SSA's planning efforts, there
are various issues that could affect its implementation of income-based
premiums. For example, SSA has about a month to determine and assess the
premiums, and faces an anticipated field office workload increase when
beneficiaries contact them for help in understanding the higher premiums
or challenging the premium assessment.

United States Government Accountability Office

Washington, DC 20548

To address the Committee's request, we reviewed relevant statutes and
program regulations on income-based premiums, interviewed officials at
SSA, the Internal Revenue Service (IRS), and CMS, and obtained supporting
documentation on their plans for implementing the income-based premiums.
We evaluated these plans based on the time frame established in the law
for SSA's receipt of income-based data from the IRS and SSA's schedule to
implement the income-based premiums by the effective date. We also
interviewed managers and staff at various SSA field offices and spoke with
Medicare advocacy groups. We did not assess the procedures used to test
IRS and SSA systems for implementing the income-based premiums. We
performed our work between May 2006 and November 2006 in accordance with
generally accepted government auditing standards.

We provided a draft of the briefing to the Commissioner of the Social
Security Administration on November 9, 2006. In response to our statement
that beneficiaries might not be aware of the income-based premiums, SSA
noted that this information was provided in the 2007 "Medicare and You"
handbook, which was sent to all Medicare beneficiaries by the end of
October 2006. SSA also noted that the current hiring freeze, which could
affect SSA's ability to respond to income-based premium inquiries, was a
result of the continuing resolution under which SSA is currently
operating. We considered these comments, as well as SSA's technical
comments, and made changes as appropriate. We have included the agency's
comments in Enclosure II. We are sending copies of this briefing to the
Commissioner of Social Security, the Commissioner of Internal Revenue, and
the Secretary of Health and Human Services, and other interested parties.
Copies will also be made available to others upon request. In addition,
the report will be available at no charge on GAO's Web site at
http://www.gao.gov. Please contact us at the number shown below if you or
your staff have any questions about this report. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on the
last page of this briefing.

Sincerely yours,

Barbara D. Bovbjerg

Director, Education, Workforce,

and Income Security Issues

(202) 512-7215

[email protected]

Enclosures

(130630)

Enclosure I: Briefing Slides

Source: GAO analysis using the announced 2007 Medicare Part B premiums. We
extrapolated the premiums for 2008 and 2009 based on 2007 premium amounts,
without estimating increases in Part B costs due to inflation and medical
cost adjustments, which are not yet known.

*The income brackets and premiums above reflect the amounts that the
government plans to use for 2007. We used 2007 amounts to show the effect
that legislated adjustments would have on the premiums of beneficiaries at
various income levels in 2008 and 2009. Beginning in 2008, the income
brackets will be adjusted by the change in the Consumer Price Index for
urban consumers, rounded to the nearest $1,000.

**Married couples who filed taxes separately, and who lived together at
any time in the tax year, are assessed premiums based on three different
Modified Adjusted Gross Income Categories: 1) $80,000 and under, 2)
$80,001-$120,000, and 3) more than $120,000. The premiums for categories 2
and 3 will be those amounts listed above for the married couple categories
of $300,001-$400,000 and more than $400,000, respectively.

Enclosure II: Comments from the Social Security Administration

Enclosure III: GAO Contact and Staff Acknowledgments

GAO Contact 

Barbara Bovbjerg (202) 512-7215 or [email protected]

Acknowledgments The following team members made key contributions to this
report: Blake Ainsworth, Assistant Director; Jeff Bernstein; Kyle
Browning; Mary Crenshaw; Rosamond Katz; Sheila McCoy; and Paul Wright.

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