Medicare Part D Costs Expected to Fall in 2012

Medicare Increased competition between Medicare Part D plans, greater generic drug use and more transparency for consumers are why the Center for Medicare and Medicaid Services (CMS) expects lower Medicare prescription drug premiums next year.  Next year, the average Medicare prescription drug plan premium will cost approximately $30, compared with an average of $30.76 in 2011, according to the Department of Health and Human Services (HHS).  CMS Administrator Dr. Donald Berwick said that the average premium is about 44 percent lower than what was estimated in 2003.

The Part D drug benefit,  enacted when George W. Bush was president, lets seniors and others on Medicare sign up for a privately administered, government-subsidized health plan to purchase their prescriptions.  The program enjoys high popularity with beneficiaries and has proven to be far less costly than budget analysts originally expected, partly because of competition among private plans and the growing use of less costly generic drugs.

HHS also announced that nearly 900,000 Americans in the Medicare Part D “doughnut hole” have benefited from a 50 percent discount in brand-name drugs in 2012.  HHS estimates that out-of-pocket savings on drug costs for Medicare beneficiaries to be about $461 million from January through June of this year.  The Obama administration has worked to strengthen the Medicare drug benefit with the help of the Patient Protection and Affordable Care Act (ACA).  The law phases out the coverage gap, long seen as one of the program’s weaknesses.  Last year, approximately four million seniors received $250 rebates because they fell into the gap in coverage.  This year, the law will provide 50 percent discounts on prescriptions for those who hit the doughnut hole.

Seniors can chose from a variety of Part D plans,  and Dr. Donald Berwick, administrator of the Center for Medicare and Medicaid Services, said competition “clearly helps” keep premiums from rising.  At the same time, he warned against overextending Part D.  HHS said 17 million seniors have received at least one preventive healthcare service without a co-pay.  The ACA eliminated co-pays for many preventive services under Medicare and will ultimately do the same for private insurance.

“This decline in the average creates more risk for plans like ‘Humana’ and ‘United Health’ that have a significant portion of the Part D members,” said Peter Costa, a Wells Fargo analyst.  Costa said one reason for the lower bids could be last year’s joint venture between Humana and Wal-Mart stores to offer Medicare drug coverage with the lowest premiums in the country.

“The Affordable Care Act is delivering on its promise of better health care for people with Medicare,” said HHS Secretary Kathleen Sebelius.  “People with Medicare who hit the doughnut hole are paying less for their prescription drugs, 17 million Americans have received free preventive services and prescription drug premiums will remain low.  These are important steps that are making a difference in the lives of millions of Americans right now.”

“Medicare beneficiaries will have more affordable prescription drug coverage next year as a result of vigorous competition in the Part D program and Medicare drug plans’ efforts to encourage seniors to choose the most affordable medicines,” said Karen Ignagni, president and CEO of America’s Health Insurance Plans.  Ignagni noted that “taxpayers are also saving billions of dollars as the total cost of the program continues to be far below original projections.”

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