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Medicare Drug Premiums Will Rise 13% in 2007
LA Times
By Ricardo Alonso-Zaldivar, Times Staff Writer
October 13, 2006

WASHINGTON — Two weeks after the Bush administration announced that Medicare prescription premiums would stay about the same next year, a new analysis by congressional Democrats indicates that for a majority of middle-class seniors, rates will jump 13% — well above the overall inflation rate.

In a sternly worded letter to Health and Human Services Secretary Mike Leavitt, Rep. Henry A. Waxman, D-Los Angeles, accused the administration of "deceptive advertising."

Medicare Administrator Mark B. McClellan fired back with a statement calling the analysis by Waxman's Government Reform Committee staff "inaccurate and misleading."

But several independent experts said it is true that seniors using the most popular type of Medicare prescription coverage — a stand-alone drug plan — will face significant premium increases next year unless they switch to more economical plans that often come with more restrictions. The prescription drug benefit is overseen by the government but delivered by private insurance companies that offer a variety of plans with differing features and premiums.

"If you look at the plans where most seniors are now enrolled, many are increasing premiums," said Tricia Neuman of the Kaiser Family Foundation, who oversees Medicare policy for the nonpartisan research group.

"What was the best deal last year may not be the best deal next year," said James Firman, president of the National Council on Aging.

The argument over how much seniors will pay for prescription drug insurance next year comes in the home stretch of a campaign in which Republicans and Democrats are working hard to attract the votes of older Americans. The announcement that premiums would remain essentially unchanged may have been welcome news to many seniors, but Waxman argued that Medicare officials based that claim on "three-card monte," a reference to a card game favored by con artists.

The claim that premiums would stay flat was based on the average of expected costs for all Medicare participants, including about 6 million who get coverage through managed-care plans that are heavily subsidized by the government and generally do not charge a separate monthly premium for their prescription benefits.

Waxman, however, excluded the managed-care beneficiaries and focused on the 16 million seniors with traditional, fee-for-service Medicare, who have enrolled in stand-alone drug plans. These plans offer prescriptions only, unlike the managed-care plans that also provide hospital and doctors' care. Premiums for the stand-alone plans are projected to rise significantly.

For example, monthly premiums for Humana's popular low-price plan will rise from an average of about $10 to around $15, the company confirmed — an increase of 50%.

"The dollar amounts may not be so great, but premiums are nonetheless on the rise," Neuman said.

Even with the increases, Humana still expects to have the lowest-cost plan in 38 states. "We still feel like we're the low-cost plan overall," spokesman Dick Brown said.

Another Humana offering, the PDP Complete plan, this year covered brand-name drugs in the so-called doughnut hole, a coverage gap Congress and the administration built into the benefit to save money. Next year, that plan will not cover brand-name drugs in the doughnut hole. And monthly premiums will rise from an average of about $58 to about $80.

The Democratic analysis concluded that the average premium for all Medicare stand-alone plans would rise from $25.69 per month in 2006 to $29.09 in 2007.

A Medicare news release issued Sept. 29 said: "The monthly premium beneficiaries will pay in 2007 will average $24 if they stay in their current plan — about the same as in 2006."

The changing premiums portend a new reality for Medicare beneficiaries, said healthcare market analyst Dan Mendelson. Until now the program offered a standard government-issue benefit for all. With the expanding role for private insurers, that's not the case anymore.

"Seniors are going to have to constantly reassess their coverage relative to their own health status and relative to what choices are being offered in the marketplace," said Mendelson, president of Avalere Health, a consulting firm. "These are commercial plans that change from year to year based on their experience, and the only way for seniors to navigate the marketplace effectively is to constantly reassess their options."

For 2006, seniors had six months to pick a drug plan. But for 2007, the open enrollment period will be about six weeks, from Nov. 15 through Dec. 31. Medicare's computerized Plan Finder, which allows seniors to compare costs and coverage for plans, will have information on the 2007 offerings starting today. It is on the Internet at http://www.medicare.gov .

"Choosing a plan may not be fun, but plans are changing," Neuman said. "I think seniors will be well advised to go back to the drawing board and revisit the decision they made for 2006."

Firman, of the group on aging, said Medicare should consider releasing the premiums for stand-alone plans separately. "There is a value in more detail being provided to people," he said.

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