Medicare Drug Premium on Rise

by JANE ZHANG and VANESSA FUHRMANS ,  The Wall Street Journal | 2008-09-26

The average premium that seniors will pay for Medicare drug coverage in 2009 will rise, with the average for the 10 most-popular plans increasing 31%, according to an analysis of new government data.

The average premium will increase 24% to $37 a month for all standalone drug plans, up from $30 this year, according to Avalere Health LLC, a Washington, D.C., consulting company that analyzed data from Medicare, the federal health-insurance program for seniors.

The average monthly premium for Humana Inc.'s basic plan, for example, will rise to $40.83 in 2009 from $25.52 this year and $9.51 in 2006, the cheapest plan that year. The plan is the second largest by enrollment, with 1.5 million participants, and overall, Humana has 3.4 million people enrolled in Medicare drug plans. Monthly premiums can vary from county to county.

The nation's most popular plan with 2.7 million participants, UnitedHealth Group Inc.'s AARP "preferred" plan, will raise its average monthly premium to $37, 15.5% more from 2008. Overall, UnitedHealth plans have 5.4 million enrollees.

UnitedHealth declined to comment on its Medicare premium increases for 2009. But the company had blamed high Medicare drug costs for part of its poor earnings performance this year. It also raised premiums across the board, in both its own branded plan and those under the AARP name.

Humana spokesman Tom Noland said the increases reflect rising costs. "If [premium] prices are increasing more on the midlevel plans, it's simply because our experience tells us that's where we need to be -- premium-wise -- to cover our actual costs plus a small margin," he said.

When the drug program began in 2006, Humana's premiums were among the cheapest. Humana, Mr. Noland said, has provided the most cumulative value for its drug-plan members, saving them an average of $4,900 on drug costs during that time and that the premiums are still in line with rivals.

The drug plans are heavily subsidized by the federal government and are offered through private insurance companies. Insurers will begin advertising their plans Oct. 1, and the six-week enrollment period starts in mid-November.

It's unclear how the price increases will affect the market. Medicare beneficiaries tend to select a plan and stay with it, and the market is highly concentrated.

Kerry Weems, acting administrator of Centers for Medicare and Medicaid Services, the federal agency that manages Medicare, said, beneficiaries should shop around to avoid "significant premium increases or changes."

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