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Medicare drug benefit to cost less, official says

August 9, 2005

By Maggie Fox, Health and Science Correspondent

WASHINGTON (Reuters) – Medicare’s controversial new drug
benefit for seniors may end up costing less than projected
because bids from insurers and others who will provide it have
been very competitive, federal officials said on Tuesday.

Some seniors who sign up for the program may not even pay
any premiums at all, and it will cost both beneficiaries and
the government less than expected, Center for Medicare and
Medicaid Services Administrator Dr. Mark McClellan said.

“Based on the actual bids that we have received, the
benefit cost per person is going to be 14 percent lower,”
McClellan told reporters.

McClellan estimated that the average monthly premium for
the prescription drug plan, which will be rolled out in October
and become active in 2006, will be $32.20.

“That is $5 less per month than we estimated earlier this
year,” he said.

McClellan declined to give a total cost estimate for the
plan but said the bids he had seen so far made it possible to
estimate a per-person cost.

The Medicare law has been controversial with both Democrats
and Republicans. Many lawmakers were alarmed when projections
released earlier this year put the cost of the new drug benefit
at $724 billion for the 10 years starting in 2006.

That was far higher than the $400 billion the White House
told Congress it would cost for 2004-2013, before the
legislation was passed in 2003.

McClellan declined to detail how many bids had been
received, or from whom. Federal officials have no idea how many
seniors will actually sign up for the plan and they will not
approve bids from the providers until next month.

But it is expected that insurers, some employers and
perhaps pharmacy chains will bid to provide the coverage, under
which they will provide drugs to seniors who sign up for their
plans and Medicare will reimburse them.

In addition, about one-third of Medicare beneficiaries will
qualify for extra help in paying their premiums if their income
is below the level, about $14,000 a year, set by Congress and
if they choose a plan costing at or below the benchmarks set by
region, McClellan said.

“Most will have their full premium paid by Medicare if they
enroll in a plan with the premium below this benchmark level,”
CMS said.

They may also qualify for a zero deductible and no co-pay,
McClellan said.

The Bush administration has been pushing to get older
Americans to sign up for the new prescription drug benefit,
passed as part of Medicare reform.

“We are far enough along to see that robust competition is
translating into lower costs,” McClellan said. He said
greater-than-anticipated use of generic drugs and savings
caused by better management of drugs — avoiding errors and
improper use, for instance — would also save money.

Some critics also say the prescription drug program is too
complex, and thus difficult for many elderly people to manage.

Robert Hayes of the Medicare Rights Center said federal
officials were acting as hucksters and making an already
complicated process even more confusing.

(With additional reporting by Susan Heavey)




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