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CMS Says More Choices Available for 2007 Part D Coverage, but Analysts Urge Caution

By Mary Agnes Carey, CQ HealthBeat Associate Editor

September 29, 2006 -- Medicare beneficiaries will be able to choose from a wider selection of prescription drug plans in 2007 that on average will cost about $24 a month, the same as this year, government officials said Friday. But beneficiaries now enrolled could face higher premiums next year and should reevaluate their plans to see if they still cover the drugs they need at a price they can afford, analysts said.

"There have been some pretty significant changes in the marketplace," said Dan Mendelson, president of Avalere Health, a health care consulting firm. "People are going to think 'I went through all this rigmarole to sign up for a plan' and they're done, but they're not. They're going to have to do it all again."

According to an Avalere analysis, beneficiaries in most states will have between 50 and 60 prescription drug plans to choose from. Beneficiaries in most states will have about 15 or 16 plans that will offer drug coverage through the Medicare drug benefit's "doughnut hole," or coverage gap; but most of those plans will only cover generics in the gap, Avalere found.

Some consumer advocates predicted that the large amount of choices available for Medicare drug coverage could be difficult for beneficiaries to sort through during the enrollment period that begins in mid-November and ends Dec. 31. The 2006 enrollment period lasted six months.

"The incredible confusion that persisted in the past year about the Medicare drug program is about to get worse," said Ron Pollack, executive director of Families USA, a liberal-leaning consumer group. Pollack and others also said beneficiaries might find that the cost of their low-cost plans will increase in 2007.

"In Maryland, for example, the lowest Humana plan premium will rise from $6.44 to $13 per month—doubling seniors' costs. As another example, the premium for the lowest-price plan for a seven-state region in the upper Midwest will increase more than fivefold," Pollack said in a statement.

Others said the abundance of choices plus the stability in the average monthly premiums was a plus. "The announcement today . . . shows once again that when competition is injected into Medicare, seniors win," said House Ways and Means Committee Chairman Bill Thomas (R-Calif.), a key architect of the Medicare drug law (PL 108-173).

Medicare officials said Friday that while beneficiaries will have about the same number of plans to choose from, more will offer enhanced benefits from the standard Medicare drug package, such as eliminating the doughnut hole, where beneficiaries must pay their own drug costs between when costs reach $2,250 and when catastrophic coverage begins at $5,100.

"The Medicare prescription drug saving seniors an average of $1,200 a year and it just keeps getting better," said Department of Health and Human Services Secretary Michael O. Leavitt. "In 2007, there will be more plans with coverage in the gap, more drugs covered, and more help from Medicare in choosing the plan that's best for you."

More than 80 percent of Medicare beneficiaries will have access to premiums lower than they paid in the program's first year, with many plans having monthly premiums of $20 or less, Leavitt said.

Medicare drug plans will cover 13 percent more drugs than before, with fewer plans using drug utilization techniques, such as prior authorization or requiring that beneficiaries first use a less expensive drug before paying for a more expensive one. But drug industry analysts stressed that plans also may have changed formularies and dropped certain drugs they previously covered.

Enrollees who are happy with their current coverage can stay in that plan when the 2007 Medicare enrollment period begins Nov. 15, but they should evaluate their current plans and compare them with what is available for 2007, said Centers for Medicare and Medicaid Services Administrator Mark B. McClellan. Plan details will be available in mid-October.

Both stand-alone Medicare prescription drug plans as well as "Medicare Advantage" plans that cover both prescription and medical coverage will offer doughnut hole coverage.

McClellan said monthly premiums for plans providing drug coverage through the gap will range from zero in some Medicare Advantage plans to $100 or more in some stand-alone prescription drug plans.

Very few drug plan providers left the Medicare market in 2007, McClellan said, but the plan choices have shifted, with fewer plans offering basic coverage and more offering enhanced coverage due to guidance from CMS that encouraged plans to offer no more than two options unless a third provided expanded coverage, such as filling in the doughnut hole.

Karen Ignagni, president and chief executive officer of America's Health Insurance Plans, a trade group representing health care insurers, said lower premiums for Medicare drug coverage will help reduce the program's cost. "The program will now cost 25 percent less than earlier projections, providing tangible evidence that the Medicare prescription drug benefit is more affordable than ever for both seniors and taxpayers," she said.

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