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CMS: Drug Premiums Just a Buck More Next Year and Benefits Will Improve Too

By John Reichard, CQ HealthBeat Editor

August 18, 2010 -- The monthly premiums charged by prescription drug plans in the Medicare program will rise on average to $30 next year compared to $29 this year and enrollees can expect lower out-of-pocket charges when they reach the "doughnut hole" in which Medicare pays nothing, federal officials announced late Wednesday.

The announcement by the Centers for Medicare and Medicaid Services (CMS) also noted that far fewer low-income enrollees will have to switch drug plans next year than has been the case in past years.

Obama administration officials seized on the opportunity to praise the health care overhaul law in making the announcement, but there was news for Republicans to crow about too—officials said that the 10-year cost of the drug benefit that the GOP-run Congress created in the 2003 Medicare overhaul law is now projected to be dramatically lower than CMS Actuary Richard Foster said it would be at the time.

Foster's 2004-2013 estimate then was $634 billion but now CMS estimates the cost at $373 billion for that time frame. Officials cited three reasons: overall drug spending reflecting price hikes and utilization didn't maintain double-digit yearly increases; drug plans negotiated bigger discounts than anticipated; and slightly fewer seniors and disabled Americans enrolled in the drug benefit than was originally projected.

There's a bittersweet twist to the good news for Republicans, however; Foster's estimate apparently was way off and Republicans now are heavily promoting his assessment that the new health care overhaul law will either cost much more than has been predicted by the Congressional Budget Office or substantially reduce beneficiary access to certain hospitals.

Premiums next year will rise only a dollar per month for basic drug coverage because cost increases were offset by increased use of generic drugs, CMS officials said. Benefits will improve in that under the health care overhaul law (PL 111-148, PL 111-152) brand name drugs next year will be offered at a 50 percent discount when Medicare enrollees reach the doughnut hole.

Another provision of the law gives CMS the power to reduce the number of low-income enrollees who have to shift drug plans when bids come in at a level that exceeds the benchmark of what the government is willing to pay. Without that provision 2.1 million would have had to switch, potentially disrupting treatment regimens but with it only 500,000 must do so.

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