Drug Benefit to Cost 14% Less, Medicare Says
WASHINGTON — Medicare announced Tuesday that its new outpatient prescription benefit would cost about 14% less than estimated next year, which means less of a squeeze on seniors' budgets and billions in potential savings for taxpayers.
Nationally, the average monthly premium that beneficiaries will pay when the program takes effect in 2006 is expected to be $32.20, down from an estimated $37.37. Premiums will vary around the country, but officials said they were expected to be lower in California because of the high level of enrollment in Medicare managed-care plans.
The new figures are based on bids from dozens of private health plans vying to offer coverage to more than 42 million elderly and disabled people who are eligible for Medicare's first-ever outpatient drug program. Previous estimates were based on government projections of what drug companies were likely to charge.
The lower estimates were good news not only for Medicare recipients and the U.S. Treasury, but also for President Bush. He made the prescription benefit a centerpiece of his domestic agenda, but the elderly have greeted the plan with skepticism -- fearing that it would be too costly to participate in.
Tuesday's announcement may make it easier for administration officials to drum up enthusiasm for the plan.
The figures announced Tuesday by Medicare administrator Mark B. McClellan came as something of a surprise. Until now, most analysts had predicted that the program would be much more expensive than Bush and the Republican-controlled Congress envisioned.
"This is very good news," McClellan said. "What we are seeing is significantly lower costs."
He attributed that to "robust competition" among private insurers and managed-care health plans.
The development may prompt more people to sign up for the benefit after Nov. 15, when Medicare starts accepting applications for coverage. Health and Human Services Secretary Michael Leavitt has cited estimates that between 28 million and 30 million will enroll in the program in 2006.
But some healthcare experts cautioned that costs and premiums may rise steeply in future years. The program is structured so that taxpayers pay 75% of the cost, and beneficiary premiums must cover the remaining 25%.
"Right now, premiums of $32 are a best guess, given that we don't have experience with these types of plans and no one has signed up for this benefit yet," said health economist Paul Fronstin of the Employee Benefit Research Institute. "In subsequent years, you will have real data to base prices on."
