- Associated Press - Thursday, September 23, 2010

Millions of seniors face double-digit hikes in their Medicare prescription premiums next year unless they actively search out cheaper coverage, a new analysis of government data finds.

Premiums will go up an average of 10 percent among the top 10 drug plans that have signed up about 70 percent of seniors, according to an analysis of Medicare data by Avalere Health, a private research firm.

While acknowledging changes are coming, Medicare officials predict a net benefit for seniors, assuming they shop around for the best-value coverage.

Marketing for next year’s drug plans gets under way Oct. 1, and seniors will see some of the biggest changes since the Medicare prescription benefit became available in 2006. More than 17 million are enrolled in private drug plans offered through Medicare.

“People are just going to have to get on top of this and shop around,” said Dan Mendelson, president of Avalere, which does research for industry and government. “Beneficiaries are really going to have to reassess their plans for next year.”

On the plus side, benefits will improve with a new 50 percent discount on brand-name drugs for those who land in the program’s coverage gap, the dreaded “doughnut hole.” It’s a major step toward phasing out the gap by 2020, required under the new health care law. Seniors don’t have to take any action to qualify for the discount.

But changes decreed by Medicare to force insurers to winnow down duplicative plans could cause some head-scratching and confusion.

More than 3 million seniors will see their plans discontinued, according to the Avalere survey. Medicare says all but 300,000 will be seamlessly switched to another plan offered by the same insurer, but the Avalere data suggest it may not be that simple.

Medicare “is really reshaping the market,” said Mr. Mendelson. “There are a lot of plans that are shutting down.”

Among them is the second-largest, the AARP MedicareRx Saver plan, with more than 1.5 million members nationally. It’s being discontinued in 2011, according to Medicare data analyzed by Avalere.

Seniors in the AARP Saver plan are expected to be switched to AARP MedicareRx Preferred, the leading national plan with nearly 2.8 million members. Both are offered by UnitedHealthcare.

But the switch will raise premiums by close to 15 percent on average for seniors in the Saver plan. They now pay an average of less than $31 a month, and would be paying nearly $35 if they decide to stay in the Preferred plan next year.

And there’s another wrinkle: Seniors who are already in the AARP Preferred plan this year and decide to stay will see their premiums fall 11 percent on average. Instead of an average of $39 a month, they’ll be paying less than $35.

A spokesman for UnitedHealthcare declined to comment on the analysis.

The study found the biggest percentage increase in premiums — nearly 43 percent — will be for the First Health Part D Premier Plus plan, offered by Coventry Health Care. Average monthly premiums will rise from under $64 to nearly $91.

Margaret Nowak, who worked on the study for Avalere, said the jump is due partly to Medicare’s restructuring and partly to the plan offering better coverage in the doughnut hole, including some brand-name drugs. Only about one-third of plans will offer coverage in the gap next year, mainly for generics.

Seven of the top 10 national plans will charge higher premiums next year, the study found.

Medicare officials did not dispute Avalere’s numbers, but they said they calculate changes in premiums differently.

Timothy Hill, deputy director of the division that oversees the drug plans, said that among other things, Medicare makes an assumption that seniors facing a premium increase will switch to a lower-cost plan that covers their drugs.

Medicare estimates that premiums will go up by $1 on average next year, or 3 percent.

“We believe our analysis stands,” said Mr. Hill. “Beneficiaries are going to see a modest change to their premiums, and their benefits are going to be better.”

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