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Just the Facts

August 14, 2009

The Centers for Medicare & Medicaid Services (CMS) yesterday announced lower than expected average premiums in the Medicare prescription drug benefit (also known as Part D) next year.  Average monthly premiums will be $30 in 2010, just a $2 increase over this year.  This market-based benefit has always been under budget, costing seniors and the American taxpayers less than predicted. Next year’s average premium will be below those that were projected in the President’s budget just a few months ago ($32, a $4 increase).

Note that this contrasts sharply with the government-set monthly premiums Democrats supported during the creation of the program in 2003. If the Democrats had been successful in that effort and premiums were set by statute rather than by market forces, the average monthly premium for seniors next year would be 40 percent higher, more than $42 per month.

Clearly private market forces work better than congressionally designed federal mandates.  As the debate over health reform continues, Congress should heed this lesson and keep Washington bureaucrats away from the design of health plans. Centralized federal control of health care just ends up costing everyone more.

Here is the full release from CMS:



FOR IMMEDIATE RELEASE                                     Contact: CMS Office of Media Affairs
August 13, 2009                                                                    


The majority of Medicare beneficiaries currently enrolled in Medicare drug plans will not see significant changes in their premiums in 2010, but some may need to take steps to ensure they have the coverage they need when open enrollment begins later this year, the Centers for Medicare & Medicaid Services (CMS) announced today. 

“The majority of beneficiaries enrolled in prescription drug plans should see only small changes in their Part D premiums or benefits in the coming year,” said Jonathan Blum, acting director of CMS’ Center for Health Plan Choices.  “Although most Part D plans should have relatively stable premiums, all beneficiaries should compare their current coverage with the plans that will be offered in 2010 when information becomes available in October.” 

In particular, some beneficiaries who receive the low-income subsidy to pay for their premiums will need to move to a new plan to ensure that they can remain in a zero-premium plan in 2010 because the plan’s premium will be higher than the 2010 subsidy amount.  CMS, working with its partners, will notify all individuals in this situation to make sure they are aware of their options.

Based on the bids submitted by Part D plans, CMS estimates that the average monthly premium that beneficiaries will pay for standard Part D coverage in 2010 will be $30, an increase of $2 over the 2009 average premium of $28.  Premiums and benefits for Medicare Advantage plans and more details about the Part D plans will be announced in September, as well as the list of plans that are not renewing their contracts with Medicare for 2010. 

The basic premiums paid by Part D enrollees cover about one-fourth of the cost of the standard Part D drug benefit.  Enrollees with low incomes qualify for subsidies that typically cover the full amount of these premiums.

Nearly 10 million beneficiaries are currently receiving drug coverage through the Low-Income Subsidy (LIS) benefit. The average value of the Part D benefit, premium subsidy, and cost-sharing subsidy for low-income enrollees is estimated to be about $4,000 in 2010.       

When individuals become eligble for the LIS benefit, CMS randomly auto-enrolls them in a Part D plan that has a premium at or below the premium subsidy amount, if they do not choose a plan themselves. As a result, these beneficiaries do not have to pay any Part D premium. In cases where an LIS-eligible beneficiary is enrolled in a plan where the 2010 premium will be higher than the 2010 subsidy amount, unless the beneficiary affirmatively chooses to stay in the plan, or choose another plan, CMS will assign the beneficiary to a new plan sponsor where they will not have to pay a premium.  CMS expects that about 800,000 beneficiaries will need to move to a plan below the benchmark amount or be automatically reassigned.  This number reflects about half of the beneficiaries who would have been affected if CMS did not undertake a demonstration program for the 2010 plan year.

“CMS continues to protect Medicare’s most vulnerable beneficiaries by using its authority to ensure upcoming premium changes will cause as little disruption as possible,” Blum said.

In addition to average premiums for 2010, CMS has announced: the 2010 national average monthly bid; the base beneficiary premium; the regional low-income subsidy premium amounts for 2010; and the 2010 Medicare Advantage regional preferred provider organization benchmarks.

These data can be found at: