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Medicare Prescription Drug Program
Medicare says Drug Benefit Enrollment Up, Costs Down
Average premium drops
to $23, 38 million enrolled
June 8, 2006 – Medicare released a fact sheet today
on the latest results of the Medicare Part D drug program that says 38
million beneficiaries are covered, the average premium is down to $23
and adjustments are being made that will allow low income beneficiaries
to continue to have zero premium drug plan options next year. CMS
officials earlier said there are about 4.5 million beneficiaries note
enrolled and about three million of those beneficiaries are low-income
beneficiaries eligible for assistance.
Following is the statement from Medicare:
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News on Medicare Drug Program |
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With a surge in enrollment ahead of the May 15
deadline, over 2 million people signed up for Medicare Part D coverage
since May 1. As a result, well over 38 million Medicare beneficiaries
have good drug coverage – that’s over 90 percent of all beneficiaries.
The surge in enrollment in Part D, which included many beneficiaries
with good health status, is helping to keep the cost of drug coverage
down by avoiding “adverse selection” problems for the program.
Beneficiaries Chose Low-Premium Plans That Are
Driving Down Costs
Not only did large numbers of beneficiaries enroll;
beneficiaries overwhelmingly chose plans that cost less than the
average.
In July 2005, the expected average premium, based
on the best estimates of the CMS Actuaries, was $37. Based on the
actual choices that seniors have made, the average premium that
beneficiaries will pay in 2006 is now about $23, down from the most
recent estimate of $25.
This more than one-third reduction in premiums
reflects both strong competition among plans, and a response of seniors
to these choices showing they were informed and clearly favored
lower-cost plans.
By choosing plans that met their needs at a much
lower cost than expected, both beneficiaries and taxpayers are saving
more than expected. The projected cost of the drug benefit has come
down greatly – by 20 percent between the 2005 Trustees Report and the
2006 Trustees Report.
Based on the results of the Part D open enrollment
process, Medicare expects to announce another significant downward
revision in estimated Part D costs next month.
Building On Larger-Than-Expected Savings from
Strong Competition and Informed Beneficiary Choices
The new drug benefit enables Medicare, like the
Federal Employees’ Health program (FEHB), to take steps to assure that
beneficiaries get quality coverage at the lowest possible cost.
Based on this year’s experience with strong
competition and informed beneficiary choices, Medicare will use its
authority now in a way that will allow low income beneficiaries to
continue to have zero premium drug plan options next year.
Our intent is to determine how to make adjustments
as necessary to moderate premium increases for all beneficiaries during
the transition. We expect that this will result in premiums that will
increase on average by about medical inflation, but that will depend on
the actual plan bids.
To promote effective competition that builds on the
savings achieved through beneficiaries’ own choices this year, Medicare
will implement a transitional approach to determining the federal
contribution to the drug benefit for low-income Medicare beneficiaries
in 2007.
In particular, we will conduct a transition from
the method of calculating the plan subsidy in 2006, before the
unexpectedly high level of competitive savings in the drug benefit was
observed, to the “weighted-average” method based on actual plan
enrollments and costs. The transitional approach means low-income
beneficiaries will have greater stability in their zero-premium plan
options, and it provides an additional incentive for plans to bid low to
continue to serve low-income Medicare beneficiaries.
Medicare will also review the plan bids for 2007 to
determine if transitional methods for determining the government’s
premium contribution for all beneficiaries are necessary to avoid any
disincentives for beneficiaries to enroll in low-cost plans, which led
to much lower costs than expected this year.
We will evaluate the impact of the transitional
approach for determining zero-premium choices for low-income
beneficiaries, and any other transitional methods, to ensure that we are
able to provide the most effective support for high-quality, low-cost
drug coverage.
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