Should seniors switch drug plans?

By The Wall Street Journal

With the open-enrollment period for Medicare under way, seniors may have more reason than ever this year to revisit their prescription-drug coverage and consider a change.

Most of the private insurers that provide the drug benefits are raising premiums for 2008. The average premium from the top three plans is set to rise 27% from 2007 levels, according to a new analysis of data from the federal government and private insurers.

Many plans will require beneficiaries to shoulder a larger share of the costs of drugs that are covered. And many people will see significant cutbacks on coverage of their medications during the "doughnut hole" gap in coverage.

The changes may make some previously more-expensive plans look more attractive. At the same time, a few insurers do plan to lower premiums. About 90% of beneficiaries will have access to at least one plan with lower premiums than they pay this year, says Herb Kuhn, a deputy administrator of the Centers for Medicare & Medicaid Services, or CMS, the federal agency that manages Medicare.

To help beneficiaries weigh options during the six-week enrollment period that began Nov. 15, Medicare is offering new tools on the Plan Finder page of its Web site. The tools include report cards that rate plans based on a range of factors, such as customer service, drug pricing and how easy it is to get prescriptions filled. Plan Finder also lets beneficiaries compare out-of-pocket costs and pharmacy networks in their areas.

Beneficiaries who prefer not to use the Web can call 1-800-MEDICARE or ask for help from state assistance groups and advocacy programs.

About 24 million seniors and other eligible Medicare beneficiaries are signed up for the Medicare drug benefit, which was begun in 2006 to provide subsidized coverage of prescription drugs through private insurers.

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Each year during the open-enrollment period, beneficiaries may elect to change plans, though they don't have to. Last year, only a small percentage of them switched plans despite a flurry of new offerings, especially in Medicare Advantage, which provides an alternative to government-run Medicare health benefits through managed-care companies. The market is still highly concentrated, with UnitedHealth Group and Humana holding 44% of the drug-benefit market.

'You need to look again'

With premiums rising, insurers are testing the loyalty of their enrollees. Some of the steepest increases are coming from some big plans that lured early enrollees with low monthly premiums in 2006, according to Avalere Health, a Washington, D.C., consulting firm that analyzed recently released data from CMS.

For example, the basic stand-alone plan from Humana will carry an average premium of $25.82 in 2008, compared with $15.14 in 2007 and $9.51 in 2006. UnitedHealth's Rx Basic plan will carry an average premium of $40.36 next year, compared with $29.57 this year and $25.18 in 2006.

"If you went to the market to look for the least-expensive plan, you need to look again," says Dan Mendelson, Avalere's president.

Nearly 20% of those enrolled in stand-alone drug plans, if they don't switch, will see increases of more than $10 a month in 2008, according to the Kaiser Family Foundation. About 25% of all enrollees who have stayed with the same plan since 2006 will face a minimum 50% increase in those original premiums.

CMS' formula

The premium increases are the most striking at Humana, which aggressively competed for market share with low premiums. Tom Noland, a senior vice president at Humana, blamed the increases mainly on the new formula that CMS used to determine bid prices, as well as increased drug costs and high usage.

"It's not that we are intentionally increasing premiums," he says.

Still, Noland doesn't expect a mass exodus among his consumers. Humana premiums, especially for its enhanced plan, are still low in many areas. In 2008, he says, Humana will not require a co-payment for eligible enrollees ordering preferred generics from its mail-order service.

Continued: Rewards for bargain hunters

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