Medicare Drug Premiums: Down 3.5 Percent or Up 9 Percent?


Will average Medicare monthly drug premiums drop 3.5 percent or increase 9 percent next year? The answer depends on whom you ask.

The Medicare agency last week posted a blog on the current open enrollment period. It emphasized its findings that the average basic premium for a prescription drug plan is projected to decline 3.5 percent to $33.50.

This contrasts sharply with findings by the Kaiser Family Foundation. The nonprofit health-care research organization pegs the projected average monthly premium for 2018 at $43.48. This represents a 9 percent projected increase.

The estimates are weighted by 2017 plan enrollment. But why the big difference?

Kaiser’s estimate is based on prescription drug plans only, not the drug portion of Medicare managed care plans, and includes plans offering both basic and enhanced coverage. The government just includes basic plans.

Medicare drug plans may offer either basic or enhanced coverage. Enhanced plans generally have higher premiums than basic plans and cover more items and services.

In 2018, 54 percent of prescription drug plans will offer enhanced benefits and 46 percent of plans will offer basic Part D benefits.

The weighted average premium in 2018 for enhanced benefit plans is $60.48—about twice the monthly premium for basic plans, $31.60, leading to the higher Kaiser estimate.

It’s not a matter of one analysis is right and one’s wrong, Larry Kocot, a leader of KPMG LLP's Center for Healthcare Regulatory Insight, told me. “You have to put your stake in the sand and go from there,” he said. Consistency year-to-year is what’s important and each has chosen a different lens, he said.

The data is revealing because knowing how one’s premium stacks up next to the national average could be useful to an enrollee. And, of course, the wonks who look at big-picture spending are all over it.

The actual average premiums will come out after open enrollment. In prior years, Kaiser found that the average premium calculated after enrollment decisions were made has been 4 percent to 6 percent lower than the projections.

The difference is a result of enrollees switching to lower premium plans and new enrollees choosing low-premium plans.

Read my related article here.

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