Drug Costs Drop Early in New Medicare Rx Program

Published March 1, 2006

The Centers for Medicare and Medicaid Services (CMS) announced in February Medicare’s new drug coverage will have significantly lower premiums and lower costs to federal taxpayers and states than expected, the result of stronger-than-expected competition in the prescription drug market and lower drug costs.

Beneficiary premiums are expected to average $25 a month, down from the $37 projected in July 2005 budget estimates. The overall cost to taxpayers for 2006 will drop 20 percent below the July 2005 estimate, according to the CMS Office of the Actuary. The savings result from lower expected costs per beneficiary; projected enrollment in the drug benefit has not changed significantly.

“Our report shows that the cost of the program will be about 20 percent less in 2006,” Department of Health and Human Services Secretary Mike Leavitt said. “Costs are going down even as enrollment is going up. This is good news for seniors, taxpayers, and the Medicare program.”

Enrollment Continues

As of January, about 24 million Medicare beneficiaries now have drug coverage, with about 3.6 million self-enrolled in the new “stand-alone” prescription drug plans and about 300,000 new enrollees in Medicare Advantage plans with drug coverage, CMS reported.

The new drug coverage went into effect on January 1 and has been alternately praised and criticized across the states as Medicare beneficiaries make the transition.

Glitches Addressed

On February 2, CMS Administrator Mark B. McClellan addressed the Senate Special Committee on the Aging on the challenges of the national transition underway with the new drug benefit.

McClellan pointed out Medicare beneficiaries must be enrolled in privately operated prescription drug plans and their use of the system tracked to ensure correct payments. The private drug plans must be paid, and the Medicare drug system must link to Social Security Administration payment systems.

Under the new benefit, McClellan said, CMS is exchanging data with more than 400 new business partners.

In his Senate testimony, McClellan said, “Through contracts with telecommunications clearinghouses that currently service the majority of retail pharmacies, the pharmacies will be able to perform real-time eligibility determinations and will be able to route claims to primary and, if applicable, secondary plans for proper adjudication to accurately coordinate benefits.”

Susan Konig ([email protected]) is managing editor of Health Care News.