Experts foresee big rises in Medicare drug premiums
With time running out on open-enrollment season, many seniors are facing sharply higher premiums for Medicare’s popular prescription-drug program. The reason: rising drug costs have overtaken a long stretch of stable premiums.
Beneficiaries have until Dec. 7 to see if there’s a lower-cost plan that will cover their medications in 2016. Consumer advocates and experts say it will pay to shop around this sign-up season.
“Premiums are going up. Deductibles are going up,” said Tricia Neuman, a Medicare expert with the nonpartisan Kaiser Family Foundation. “There is some potential to save a lot of money by switching plans.”
Government spending on the program also has risen significantly, driven by pricey new drugs, notably for hepatitis C infection. The cost for the hepatitis drugs in the Medicare program is expected to be $9.2 billion this year, a near doubling from 2014. Because of the prescription program’s financial structure, taxpayers cover most of the cost for expensive medications. Three out of four adults infected with hepatitis C are baby boomers, the group now entering Medicare.
Also known as “Part D,” Medicare’s prescription plan serves about 40 million older and disabled people. Benefits are provided through a variety of insurance arrangements. Stand-alone drug plans that work with traditional Medicare are the most popular, accounting for more than half of beneficiaries – about 24 million people.
Sal Natale, a retired dentist who lives near Tampa, Fla., said prescription premiums for him and his wife are going up about 30 percent next year, and he doesn’t see a good alternative.
“I’m just going to grin and bear and hope it starts moderating,” Natale said. The couple is signed up in the Humana Enhanced plan, one of the top 10. Nationally, premiums for that plan are going up by about $13 a month, according to the Kaiser foundation.
Indicators signal rising costs across the program. Among them:
Independent estimates by Kaiser and the consulting firm Avalere Health show increasing premiums for stand-alone drug plans. The average premium will rise from $36.68 to $41.46 per month next year, or 13 percent, according to Kaiser. Even if many beneficiaries switch to lower-cost options, it’s likely to be the biggest increase since 2009.
The maximum deductible for prescription coverage will rise by $40, to $360. That’s the biggest increase in the deductible since the inception of Part D in 2006. The deductible is the amount of drug costs that beneficiaries must pay each year before their insurance kicks in.
Taxpayer expenditures for the “catastrophic” portion of the benefit – in which beneficiaries with high drug bills pay only 5 percent of the cost – will rise by $4.5 billion in 2016, an increase of more than 14 percent. Spending for catastrophic coverage has doubled in just a short time, from $15.5 billion in 2012 to an estimated $31.2 billion this year.
The analyses from Kaiser and Avalere are seemingly at odds with the message coming from the Obama administration, which estimates that drug premiums will remain stable in 2016, averaging $32.50 a month.
But the administration and the independent analysts measure differently. For example, the administration adjusts its number for the estimated impact of people assumed to be switching to lower-premium plans.
The outside analysts instead focus on what’s happening to premiums in the plans for which people are currently signed up.