Medicare D premiums up for 2008, but lower than expected

Private-sector competition is helping drive down cost growth, federal officials say.

By David Glendinning, AMNews staff. Sept. 3, 2007.

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.