Average Medicare Prescription Drug Premiums To Rise

If consumers stay put in their current Medicare prescription drug plans, the average beneficiary will see a 21% increase in their monthly premiums for 2008, says new analysis released by Avalere Health.

Using newly released CMS data and its proprietary DataFrame database, Avalere experts computed an "enrollment weighted" average premium for the Medicare Part D marketplace. Under this method, the premiums of plans with the most enrollees are assigned a heavier weight relative to plans with scant enrollment, giving a truer measure of the beneficiary experience. For example, a premium increase for a prescription drug plan (PDP) with 3 million enrollees carries vastly greater impact on more people than a premium increase for a plan with 10,000 enrollees.

"The reality of the Medicare experience is that beneficiaries have been very loyal thus far to their initial plan selections," said Dan Mendelson, president of Avalere Health. "If consumers stick to their choices again, they are likely to see a dramatic increase in their monthly premiums. But, consumers who shop around may be able to find lower cost alternatives."

The top ten PDP sponsors in Medicare have more than 80% of the people enrolled in stand-alone PDPs. Among those top ten plan sponsors, all have raised their premiums, with the exception of two: CVS Caremark's SilverScript plan and First Health's Part D Premier plan. Using Avalere's enrollment-weighted premium methodology, the Humana PDP Standard (currently with the second-most enrollment) raised its premium an average of 69%. The largest increase -- 89% -- is in United's Medicare Rx AARP Plan-Saver PDP, which as of July 2007 had over more 900,000 enrollees.

"The shift in premiums from year to year reflects a close calibration by the plan sponsors to maintain customer loyalty, remain competitively priced, and achieve profitability," said Bob Atlas, senior vice president of Avalere Health.