The 10 insurers with the most Medicare drug plan customers raised premiums an average of 10 percent this year, an analysis released Friday by consulting firm Avalere Health shows.
While the premium increases are far lower than those for many health care policies sold to individuals and small businesses outside Medicare, the rate rise is still many times higher than inflation, which is 2.6 percent for the last year.
Premiums in the top 10 drug plans rose from $31.14 a month in 2009 to $34.30 this year, Avalere found. Across all plans, rates rose an average of six percent since last year, to $37.25.
In addition to premiums, many insurers have also raised the amounts that Medicare beneficiaries pay at the pharmacy counter. The average co-payment for a “preferred” brand-name drug rose from $34.83 in 2009 to $36.25 this year, while the average co-payment for other brand name drugs went from $74.31 to $78.95, the Avalere report found. The open enrollment period for the drug plan this year has ended.
The Obama Administration has sharply criticized plans by non-Medicare insurers to raise health insurance premiums in the double-digits this year, including some individual policies sold in California by Anthem Blue Cross set to go up by 39 percent.
But the stand-alone Medicare plans are “a different animal” in contrast to health plans sold to individuals and small businesses, says Walton Francis, author of Consumers' Checkbook guides to the federal employee health benefits and a book on Medicare. That’s because they cover only one thing, drugs. And, unlike policies sold to individuals in most states, the Medicare drug insurers can’t reject applicants or charge some people more than others.
Rising rates, Francis says, may be more a reflection of “what’s going on in the underlying price of drugs and how successful are the insurers in getting people to switch from brand-name to generic drugs.”
Matt Burns, a spokesman for UnitedHealthcare, the largest insurer nationally with 4.5 million enrollees in its drug-only Medicare plans, said increasing drug costs and “the number and types of drugs purchased by members” helped fuel the increase.
Timothy Hill, a deputy director in the Medicare program, says about half the average drug premium increase this year results from a change in the way Medicare calculates risk adjustment payments to insurers.
The Medicare drug program has elements similar to what is being proposed nationally for individuals and small businesses in congressional health care overhaul legislation, including a large marketplace of private insurers overseen by government regulators. Avalere’s CEO, Dan Mendelson, says the exchanges can work to slow premium growth. The data on the Medicare drug plans shows, though, “that insurers will ultimately pass along the inconsistencies and failures of our health system” and premium growth won't slow "until we solve some of the underlying problems.”
Since the first full year of the drug program in 2006, premiums across all plans are up an average of 43 percent.
Medicare's drug program differs in some key ways from the insurance and regulatory models being proposed in Congress. For one thing, it is voluntary, whereas the overhaul legislation would require most Americans to carry health insurance coverage, which could help temper premium increases if many young and healthy people join the insurance pool.
Another difference: Medicare officials say they don’t have the power to outright reject premium increases in Medicare Part D, as it is called.
Under legislation passed by the Senate, the Secretary of Health and Human Services would be able to bar insurers from selling policies on the exchanges if their premiums were deemed excessive. The Obama Administration has also called for a federal rate review authority, which would work with states to oversee premium increases.