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Analysis Finds Higher Prices, Fewer Drug Choices for Medicare Beneficiaries

By Mary Agnes Carey, CQ HealthBeat Associate Editor

November 14, 2008 -- Many Medicare beneficiaries will have fewer drugs to choose from next year and will pay more for them, according to a new analysis from the health care consulting firm Avalere Health.

As enrollment for the 2009 Medicare prescription drug benefit begins tomorrow, a combination of premium increases, reductions in the number of drugs covered, and higher copayments for beneficiaries in Medicare prescription drug plans could cause financial hardship for Medicare enrollees, said Avalere president Dan Mendelson.

Avalere found that premiums for Medicare's 10 most popular prescription drug plans (PDPs) will increase on average by about 31 percent next year, with increases ranging from as low as 8 percent and as high as 64 percent. The firm's data also shows that nine of the top 10 prescription drug plans have reduced the number of drugs covered by between four to 17 percent, with an average reduction of about nine percent.

"The basic theme is pay more, get less," Mendelson said in an interview. "A lot of these increases will come in the form of increased cost-sharing on drugs, copays, and coinsurance and the fact that formularies are tightening typically means that the drugs used to treat chronic illness are not covered as widely."

Jeff Nelligan, director of media affairs for the Centers for Medicare and Medicaid Services, called the Avalere analysis "flat wrong."

"The number of unique drug products increased by an average of 10 for [Medicare Advantage Prescription Drug Plans] and decreased by an average of one for PDPs after accounting for products that were no longer considered Part D covered," Nelligan said.

But even accounting for drugs no longer covered by Medicare does not explain formulary reductions in by as much as 17 percent in some of the program's largest prescription drug plans, Mendelson said.

The Avalere analysis found that Humana's Enhanced prescription drug plan, which covers about 1.4 million Medicare beneficiaries, will reduce the number of drugs offered by 17 percent while beneficiaries' cost-sharing for prescriptions will increase in 2009. In addition, beneficiaries enrolled in that plan will see their monthly premiums increase from about $23 to $38.

In a statement, Humana spokesman Jim Tuner said the company's 2009 PDP prices "reflect the experience we've seen over the past three years, and our expectations around what will most interest our members and potential members going forward."

Turner added that premiums for Humana's Standard and Enhanced plans, which he said are the company's most popular plans among beneficiaries, "are near the average for all plans and comparable to similar offerings from AARP, as the Avalere analysis shows."

While the top 10 PDPs will continue to charge low cost-sharing for generics, cost-sharing for higher-priced drugs—usually brand-names—will increase in many plans next year, Avalere found.

For example, the average tier 3 copayment for UnitedHealth's AARP MedicareRx Saver plan will increase by $8 while Humana PDP Standard, which previously charged 25 percent coinsurance on all covered drugs, reduced the tiers from four to three but will nearly double the coinsurance percentage for non-preferred drugs on tier 3 to an average of 45 percent, according to the report.

Among changes in formulary coverage, AARP's Medicare Rx Preferred will reduce the number of covered drugs by 7 percent in 2009 while the MedicareRx Rewards Value plan will cut its formulary by 10 percent, according to Avalere. The PrescribaRX Bronze plan will increase its formulary by 17 percent.

Mendelson said many plans underpriced their products when they entered the drug benefit and now are raising premiums and beneficiary cost-sharing to make up for past losses.

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