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Waxman Calls HHS Analysis of 2007 Medicare Premiums 'Misleading'

By Mary Agnes Carey, CQ HealthBeat Associate Editor

October 12, 2006 -- Medicare officials' recent estimate of what beneficiaries would pay for drug coverage in 2007 is "misleading and disguises significant cost increases" for Part D coverage, according to a report Rep. Henry A. Waxman (D-Calif.), released Thursday.

Last month, Medicare officials said beneficiaries would 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. Department of Health and Human Services (HHS) Secretary Michael O. Leavitt said more than 80 percent of Medicare beneficiaries will have access to premiums lower than what they paid in the program's first year, with many plans having monthly premiums of $20 or less.

But in a letter sent Thursday to Leavitt, Waxman said his staff's analysis of the 2007 Medicare plan premiums found they will increase on average by more than 10 percent—to about $29 per month—with premiums for the lowest-priced plans increasing over 40 percent.

The difference between the administration's estimates and Waxman's is in how they were calculated. The administration's estimates include premiums charged by both stand-alone prescription drug plans as well as Medicare Advantage plans, which include both health care and drug coverage. Waxman's staff only looked at prices and benefits for the stand-alone drug plans, which are available to the 90 percent of beneficiaries who have remained in traditional Medicare program.

"Combining the actual premiums for drug plans with these estimates in managed care plans is mixing 'apples' and 'oranges' with the average price of 'fruit,'" Waxman wrote. "It is not merely confusing arithmetic, it is deceptive advertising."

Centers for Medicare and Medicaid Services Administrator Mark B. McClellan labeled Waxman's analysis "incomplete and misleading" because it measured just one way that Medicare beneficiaries could receive drug coverage.

"The average premium of the basic Part D coverage, which is delivered by two methods . . . is $24, an average premium raise of 0.1 percent" for 2007, McClellan said.

In his statement, McClellan also said that 83 percent of beneficiaries now in a prescription drug plan will have access to at least one plan with a lower premium than what they were paying in 2006.

Waxman, who is the ranking member of the House Government Reform Committee, said his staff's review of the data found that the average premiums across all Medicare drug plans are increasing 13.2 percent in 2007 and that average premiums for Medicare drug plans with the same deductible and same coverage gap in 2006 and 2007 are increasing 11.1 percent next year.

Beneficiaries who choose the lowest-priced plan will face premium increases of more than 44 percent in 2007, Waxman wrote, with some plans decreasing benefits while premiums rise.

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