Medicare D premiums up for 2008, but lower than expected

Washington -- The average monthly premium that seniors pay to participate in the Medicare drug benefit will be about $25 next year, nearly 40% less than what federal officials had originally estimated.

When Medicare Part D was established in 2003, the Centers for Medicare & Medicaid Services estimated the average premium would top $40 by 2008. The $25 figure is higher than the $22 average premium for the 2007 plan year, but CMS chalks up the increase largely to technical adjustments required by law, rather than increased bids by private drug plans.

"Medicare drug benefit bids continue to be well below projections because of increased generic usage, effective plan negotiation and strong competition," said Herb B. Kuhn, CMS' acting deputy administrator.

Premiums are not the only out-of-pocket costs incurred by Medicare beneficiaries. They also must pay a portion of the prices of any drugs they take. Some organizations, such as the AMA and AARP, have called for direct government negotiation of the drug prices offered by private plans as a way to lower co-payments.

The latest announcement shows that pharmacy benefit managers administering Medicare Part D are doing their part to help keep the coverage affordable without the need for heavy-handed government intervention, said Mark Merritt, president of the Pharmaceutical Care Management Assn., which represents PBMs.

"Part D sponsors continue to exceed expectations in terms of the savings, choice and satisfaction they offer to America's Medicare beneficiaries," he said. "In 2008, many beneficiaries will be able to choose a plan that offers the same or even lower premiums than they had in 2007 -- while still enjoying tremendous access to the medications they need."

Although the benefit has significantly increased drug coverage among seniors, Part D enrollees do not get as good a deal as those enrolled in employer-based programs or the Dept. of Veterans Affairs' benefit, according to a survey of more than 16,000 seniors by the Kaiser Family Foundation, the Commonwealth Fund and the Tufts-New England Medical Center.

"The Medicare drug law achieved its primary goal of providing drug coverage to most seniors who previously lacked it," said Drew E. Altman, PhD, Kaiser Family Foundation president and CEO. "But the survey found a significant number of seniors in Part D plans paying sizeable amounts out of pocket for their medications and delaying or not filling their prescriptions for cost reasons."

More than 11% of enrolled seniors with three or more chronic conditions, for instance, said they paid more than $300 per month on prescription drugs. Less than 8% of chronically ill seniors in employer-based plans and less than 7% of VA plan enrollees reported spending this much.

Additional government subsidies are available to beneficiaries who meet low-income requirements, but millions of these seniors are not taking advantage of the extra help, the study authors said.