Medicare's Cheapest Drug Plans in U.S. to Cost 44 Percent More

From Bloomberg: By Kerry Young

Oct. 13 (Bloomberg) -- The cheapest drug insurance policies under Medicare will cost elderly and disabled Americans 44 percent more next year, based on rate quotes published by the government health program.
The average monthly outlay for the least expensive plans will rise to $13.58 from $9.46, according to data compiled by Medicare. Humana Inc., the biggest provider of low-cost drug plans, raised prices as much as fivefold, while Medicare cut its monthly subsidy by 15 percent, to $80 a person, said Peter Ashkenaz, a Medicare agency spokesman.
Americans who are at least 65 and those with disabilities pay monthly premiums for the drug coverage under a U.S. program that started last January. Insurance companies last year charged as little as $1.87 for policies providing discounts on medicines. For next year, the cheapest plan will cost $9.50. Many of the 23 million people in the Medicare drug program pay premiums out of Social Security pensions, averaging $922.70 a month.
``Many people are going to feel that they are victims of a bait-and-switch tactic,'' said Ron Pollack, executive director of Families USA, a Washington-based nonprofit group that studies health care, in an Oct. 3 telephone interview. ``There's no question that it will be an extraordinary disappointment.''
Congress created the Medicare drug benefit three years ago to help the elderly buy medicines. The price of almost 200 prescription treatments often used by older people rose 6.3 percent in the 12 months through June, according to AARP, the largest lobbying group for American 50 and older.
The drug plan next year will account for about 12 percent of Medicare's $445 billion budget, according to the Congressional Budget Office. Medicare pays insurance companies to negotiate bulk discounts on medicines such as Pfizer Inc.'s Lipitor cholesterol drug, which can cost more than $3 a pill.
Wrong Number
An analysis by Representative Henry Waxman, a California Democrat, found that the average monthly payment for all Medicare plans will rise to $29.09 next year from $25.69. The plans include those with enhanced benefits, in which customers accept a higher premium in return for payment of drug costs between $2,400 and $3,850, which aren't covered by Medicare.
The average price is about 21 percent, or $4.09, more than claimed by the Department of Health and Human Services, Waxman's office said. HHS and Medicare officials released next year's prices Sept. 29, saying the average monthly premium would remain unchanged at $24.
``The department's numbers appear to be wrong, and they disguise significant increase in premiums for Medicare drug plans,'' Waxman said in a letter to HHS Secretary Michael Leavitt. ``The release of erroneous information about the cost of premiums -- whether deliberate or not --is a disservice to millions of seniors.''
`Incomplete and Misleading'
Medicare said in a statement that its average was derived from a ``straightforward'' analysis of the plans available to consumers.
``The congressman's analysis is incomplete and misleading because it is selective, measuring just one of the plan options beneficiaries can use to get their prescription drugs,'' said Mark McClellan, administrator of the Centers for Medicare & Medicaid Services, in the statement.
McClellan declined through a spokesman to be interviewed on the premium data for this article.
``There really is no low-cost option any longer,'' said Gerard Anderson, a professor of public health at Johns Hopkins University in Baltimore, in an Oct. 4 interview.
The minimum prices will more than double in 13 states. People in seven more states and the District of Columbia also will pay more than double next year if they stick with their current plans.
New York
New Yorkers will have to join HIP Health Plan of New York to get the cheapest drug plan for next year at $9.50 a month. Humana, the state's low-cost option this year at $4.10 a month, set $14.80 as its lowest rate in the state next year.
``Most people don't know what is happening yet,'' said Deane Beebe, a spokeswoman for the New York-based Medicare Rights Center, in an Oct. 5 interview.
The biggest jump will take place in the seven states with the lowest 2006 premiums. The minimum monthly cost of the cheapest Humana plan will jump to $10.60 from $1.87 in Iowa, Minnesota, Nebraska, Montana, Wyoming and North and South Dakota.
``I knew it wasn't going to stay that low,'' said Janet Hackleman, manager of Wyoming's State Health Insurance Information Program, in an Oct. 2 interview. ``Everyone is sorry that it had to come up. Now, it's a little more realistic.''
Humana, UnitedHealth
Humana never meant to offer such a bargain price for Medicare drug insurance, said Tom Noland, a spokesman for the Louisville, Kentucky-based company. Humana misjudged what other companies would bid, he said. Humana's offer was so much lower than rivals that it skewed a Medicare benchmark and reduced the cost of the benefit for consumers, he said.
``We did not bid $1.87,'' he said. ``We bid higher than that.'' Medicare cut Humana's prices by $7 a month on average last year and raised them by $4 this year, he said.
WellCare Health Plans Inc. and UnitedHealth Group Inc. introduced more low-cost offerings for next year compared with last year.
To contact the reporter on this story: Kerry Young in Washington kdooley@bloomberg.net