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Medicare drug plans hike costs into 2008

Most Medicare Drug Plans Continue to Hike Costs into 2008 Two-to-Three Times Rate of Inflation

Spiraling costs for seniors underscore need for Congress to allow price negotiation

(Washington, D.C.) – Consumers Union has found that 75 percent of Medicare drug plans continue to hike the cost of prescriptions for seniors, with an average increase of $369 for five commonly used drugs between the month of December and January alone. About one in six plans tracked increased prices on the five drugs by more than $500 during that time.
Using the Medicare.gov Web site, Consumers Union has tracked the costs of five prescriptions offered by private Part D plans in five states since the program began in December 2005. The tracking shows the bulk of insurance companies have annually increased the costs of the drugs about two to three times the rate of inflation.
“Most of these Medicare drug plans are increasing costs double or triple the rate of inflation, which really torpedos the insurance industry’s claim that they are getting the best deal for seniors,” said Bill Vaughan, senior policy analyst for Consumers Union, publisher of Consumer Reports.
“These continual price hikes are Exhibit A for Congress to give renewed attention to negotiating drug prices on behalf of America’s taxpayers and seniors, and offering the option of a Medicare-run drug benefit,” Vaughan added.
CU’s findings coincide with a new report from the Annals of Internal Medicine (embargoed for release until 5 p.m. Monday) that finds the Medicare Part D program saved beneficiaries on average about $6 to $9 a month on prescriptions over what older Americans not yet eligible for Medicare pay.
Vaughan said that while the Part D program has undoubtedly helped many seniors save more on their medicines and access needed drugs, the relatively low savings found by the Annals report reinforces the need for Congress to allow drug price negotiation.
“Considering the Medicare drug program costs taxpayers about $60 billion a year — and that number will double in about 5 years — it seems incumbent on Congress to get better savings for seniors than $9 a month on their prescriptions,” Vaughan said.
When the Medicare Part D program was passed in 2003, Congress specifically prohibited giving Medicare the power to negotiate lower drug prices like the Department of Veterans Affairs currently does. The House last year passed a bill to give the government the power to bargain on behalf of private insurance plans, but the Senate was unable to pass a similar bill.
Each month since December 2005, Consumers Union has been monitoring the price of five common drugs in a zip code in each of five large population states – California, New York, Illinois, Florida and Texas. The data has consistently shown major swings in price, usually upward, that have far exceeded basic inflation in the economy.
CU has also found that costs consistently increase from December to January. Beneficiaries are allowed to switch plans during open enrollment from mid-November to Dec. 31 each year, and the hikes seem to coincide with the end of open enrollment season.
“It is too late now for 2008,” said Vaughan, “but the data also shows why it is important for a Medicare enrollee to take the time during open enrollment to check if their plan will change the price of the drugs they are taking the following year. Otherwise, the first January visit to the pharmacy can be a shock.”
The data showed several Aetna and Envision Rx plans in the five states increasing the price of the package of five drugs by more than $1,000 between December and January. It also showed that about 25 percent of plans decreased the costs for the five drugs during that time, with an average drop of $220.
“Some drug plans are lowering costs, but the declines are much smaller and less dramatic than the increases,” said Vaughan.

Bill Vaughan
Susan Herold