Medicare just turned 49 years old, and the program celebrated with some good financial news for seniors: Premiums will not rise in 2015 for the third consecutive year.
The question now: How long can the good news persist? Worries about Medicare’s long-range financial health persist, but for now persistent low healthcare cost inflation will translate into a monthly premium of $104.90 next year for Part B (outpatient services), according to the Medicare trustees. Meanwhile, the Centers for Medicare & Medicaid Services (CMS) says the average premium for a basic Part D prescription drug plan will rise by about $1, to $32 per month.
The Part B premium has been $104.90 since 2012––except for 2011, when it actually dropped by about $15, to $99.90. The moderation is good news for seniors, since premiums are deducted from Social Security checks. Beneficiaries will keep all of next year’s Social Security cost-of-living adjustment, which likely will be about 1.7 percent.
Meanwhile, the average Part D premium has been $30 or $31 since 2011. That’s because of a dramatic shift to cheap generic drugs, and innovation by plan providers competing for customers.
“Seniors can expect to see more of what they’ve been getting over the last few years, which is increasing effort by Part D insurers to offer very-low-premium plans,” says Matthew Eyles, executive vice president of Avalere Health, a consulting firm specializing in healthcare.
As in recent years, Eyles says, the best deals will be found in plans that require enrollment in preferred pharmacy networks. Those plans offer lower premiums and co-pays. “We’ll also see plans limiting or eliminating deductibles, and encouraging the use of generics by offering them free or at nominal prices," says Eyles.
But the average figures mask a more complicated story. Part D enrollees will find significant regional variations in premiums around the country. CMS data shows average premiums will be as low as $21.19 in New Mexico, and $25.83 in Florida––but as high as $39.74 in Idaho and Utah.
Eyles says it is not entirely clear why premiums will vary so extensively, although the prices tend to track the overall cost of healthcare, and are related to the overall
healthiness of seniors by state.
“The plan providers have to submit bids for regions that take into account differences in the enrolled populations, including prescribing and utilization patterns,” he says. “It could be that one state tends to have more people using statins, or a diabetes medication.”
Another complication in Part D is the "doughnut hole," the gap in coverage for Part D enrollees with high drug costs. Higher-cost plans are available to provide gap coverage, but the hole’s size is being shrunk under a provision of the Affordable Care Act (ACA), and the gap is set to disappear in 2020.