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Premiums for Medicare Drug Plans Jumping 8.7%
By Julie Appleby, USA TODAY
October 1, 2007
Many seniors and the disabled enrolled in the Medicare drug program are likely to pay more next year, with the average premium for all stand-alone drug plans rising 8.7% to $40 a month, according to data released late Thursday by the Centers for Medicare and Medicaid Services.
"Plans that are popular are raising prices because they understand that seniors are not interested in switching.(carriers)," says Dan Mendelson, president of Avalere Health, a private research firm that analyzed the Medicare data.
The Avalere analysis also found:
Most of the plans with the largest enrollment will increase their monthly premiums next year $5 to $10 a month. The average cost this year for all stand-alone drug plans was $36.81.
The insurer with the largest market share, UnitedHealth, which offers a plan in conjunction with AARP, raised its prices about $5 a month to average $32. That move put it over a cost limit for so-called "dual eligibles" those who qualify for both Medicare and Medicaid because they are low-income in 18 out of 34 regions nationally. As a result, about 650,000 dual-eligible enrollees now in United plans will be switched to other carriers.
Nationwide, 1.6 million people in United and other insurance carriers' plans who qualify for both Medicare and Medicaid will be automatically reassigned from United and other health plans to new carriers.
"This is huge," says Mendelson. "People will be assigned to plans that may have different benefits. They might be assigned to a plan with a generous formulary (list of covered drugs) or they might not be."
Medicare rules allow insurers to contact the affected enrollees and offer them the opportunity to stay in their current plan, if they pay the difference between the cost limit set by the government and the actual cost, according to a written statement from United, which says it has about 6 million enrollees in Medicare drug plans.
The company statement also said it expects the loss of the dual eligibles to have "a minimal impact" on overall earnings performance.
Jeff Nelligan, a spokesman for Medicare, says the agency will work with the insurance plans, the Social Security Administration and the states to "ensure that the (low-income) beneficiaries are placed in a plan that is right for them."
The agency's own press release says that the average premium for basic Medicare drug plans next year will be $25. The difference between that figure and Avalere's $40 cost is that Avalere is including plans that offer more benefits, such as lower deductibles, than the standard plan. Most enrollment is in the enhanced plans.
Nelligan says that inflation accounts for much of the increase in costs for next year. He also says the average premiums are still far lower than projected when the Congress approved the drug benefit in 2003.
"And beneficiaries are saving an average of $1,200 a year on their prescription drugs," Nelligan said.
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