Medicare drug coverage is costing most seniors more

Those in the 10 largest plans -- which account for nearly three-fourths of seniors signed up for drug coverage -- are paying an average of $26.39 a month, or 16% more than last year, according to the analysis by Avalere Health, an information company serving the healthcare industry.

The rise is modest in dollar terms, and some of the top plans actually lowered their premiums for 2008. But on average, the percentage increase for the drug plan is greater than the change in Medicare's Part B premium for outpatient care, which rose only 3% in 2008.

"A 16% increase is significant in and of itself, because premiums are rising rapidly at a time when Medicare beneficiaries are finding it harder to afford it," said Dan Mendelson, president of Avalere. "These are individuals on a fixed income who are facing rapidly rising prices elsewhere in the economy."

Indeed, he added, premiums for many seniors appear to be going up faster than the cost of coverage for commercial insurance plans that serve workers and their families. Data from Mercer, a benefits consulting firm, show that drug-benefit costs rose a little more than 9% last year for large employers. Both kinds of coverage are delivered by private insurers, but because the Medicare plan is heavily subsidized by taxpayers, a precise comparison is difficult.

Although seniors are one of the most important groups of voters, Medicare has not been a major issue so far in this year's election. But the rise in prescription premiums may boost Democratic proposals to authorize Medicare to negotiate prices with the pharmaceutical industry. On the Republican side, presumptive presidential candidate John McCain supports giving Americans the right to import lower-cost medications from countries, such as Canada, where governments set prices.

The next president will face a difficult challenge just to maintain Medicare benefits at current levels, let alone make them more generous, since the program faces a serious long-term funding shortfall.

Medicare officials say the prescription program, with more than 25 million beneficiaries, is a successful example of how private companies can improve the delivery of government benefits. They point out that in many cases, monthly premiums are lower than estimated at the program's inception, and they credit that to competition among private plans.