Don't Cash That Medicare Check!

Don't cash that check.

The federal government has erroneously reimbursed about 230,000 Medicare recipients for monthly premiums they paid this year for prescription drug coverage. For many, the checks — totaling nearly $50 million — have already arrived.

The refund will undoubtedly cause confusion, particularly because it comes with a letter that mistakenly instructs seniors that their monthly premiums will no longer be deducted from their Social Security check.

Mark McClellan, who oversees the Centers for Medicare and Medicaid Services (CMS), said people who get the check need to know two things. One, the money has to be returned. Two, their prescription drug coverage will continue.

"It's very important for people to know their coverage is continuing," he said. "There's no disruption at all."

Medicare officials say they caught the glitch just after the checks were sent out last week. As a result, they sent a second letter Tuesday letting people know about the problem. The average overpayment comes to about $215.

In many cases, seniors get their Social Security payment through direct deposit. They, too, should set the extra money aside and not use it for other purposes because the payment will have to be returned, officials said.

But not everybody is listening. "I cash every check I get and then I go off and buy groceries," senior citizen Doc Crotty told CBS News correspondent Wyatt Andrews

But that tactic won't help, because ultimately the government can take the money back by reducing the next Social Security check, reports Andrews.

About 5 million people pay their monthly premiums for Medicare drug coverage by having the government withhold the money from their Social Security check.

McClellan said his agency will make sure that insurers who administer the new drug benefit continue to get paid for the beneficiaries caught up in the error. He said that his agency was responsible for the error and that the subsequent letter contains an apology.

The error occurred as McClellan's agency updated the Social Security Administration about various changes in coverage that beneficiaries had requested. For instance, beneficiaries contact CMS because they want to switch plans or change how they pay their monthly premiums. CMS contacts Social Security officials because the changes often require an adjustment in the amount deducted from a beneficiary's checks. In this instance, the wrong information was transmitted, McClellan said.

McClellan also said that beneficiaries need to know the government won't be able to start making monthly premium deductions again until October.

He said the agency will work with beneficiaries who face a money crunch in the fall because they had already cashed the check from the Social Security Administration or because they can't afford to have premiums from a few months deducted from one Social Security check.

"The amounts involved here are generally not large, but we want to make sure that as we account for these extra payments, we do it in a way that's not burdensome," McClellan said. "There are a number of approaches we can take, including doing (repayment) over time if necessary when it's not a trivial amount of money for the beneficiary."