Premium Taxes Assessed Against the Medicare Cost-Based

410.1 - Premium Taxes Assessed Against the Medicare Cost-Based HMO/CMP (Rev. 4, 10-01-01) Some State and local governments are assessing organizations a tax based on premium revenue. If there are no exemptions that could be used to legally avoid the assessment of this tax, CMS will recognize the expense as an allowable cost. However, the amount CMS should pay would be the amount of the assessment that is applicable to premiums charged to Medicare enrollees for covered services. This is accomplished by including total premium assessments in Plan Administration costs and using the Medicare to Total Member Month ratio to apportion cost. Payments by CMS to a cost contractor for covered services rendered to Medicare enrollees do not constitute premiums. Rather, CMS is buying each covered service at cost less applicable Medicare deductible and coinsurance. The only premium for covered services paid to the Medicare cost-based HMO/CMP is paid by the Medicare enrollee for Medicare’s deductibles and coinsurance. Therefore, the amount of the assessment to be paid by CMS should be limited to that amount applicable to Medicare’s deductible and coinsurance charged as a premium.