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Every fall, seniors get an opportunity to enroll in a Medicare drug plan during the Medicare's open enrollment period, which begins on October 15 and runs through December 7. And this year, tens of millions of seniors who sign up for a Medicare prescription drug plan are going to pay significantly more than they do now.
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Premiums and deductibles are soaring higherA study conducted by Kaiser Family Foundation finds that the average prescription drug plan offered to Medicare recipients will cost $41.46 per month, which is 13% higher than the average plan cost during open enrollment last year.
Across prescription drug plans with the largest number of enrollees, seven of the eight biggest plans are increasing their monthly premium and five of the seven that are increasing premiums are doing so by more than the national average.
The increase in plan premiums is expected to be the biggest such jump since 2009 and it could affect tens of millions of people given that nearly 40 million Americans are currently enrolled in a Medicare drug plan.
Additionally, more seniors will end up buying a prescription drug plan that has a deductible than ever before and, sadly, those deductibles are growing. Two-thirds of all prescription drug plans sold this year will include a deductible, up from 58% last year, and the maximum deductible is growing to $360 from $320 in 2015.
Higher premiums and higher deductibles means that millions of American seniors are going to be on the hook to pay more for their medicine next year, something that's especially frustrating given that Social Security payouts aren't increasing next year because overall inflation is low.
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Why are costs surging?The increase in premiums and deductibles can be blamed on a number of things, including a shrinking number of plans being offered to seniors and ever-higher drug prices.
In 2016, Medicare recipients will choose from an average of 26 plans and that's the lowest average number of plans available to consumers in the past 10 years and down from a peak of 55 plans in 2007.
In addition to the negative impact associated with fewer competitors, drug plan prices are also heading higher because more new medicines are commanding sky-high prices and that's pressuring insurers, which already operate on low operating margins, to ask patients to pick up more of the tab.
Last year, drug costs gained significant media attention when next-generation therapies for hepatitis C were priced at north of $1,000 per pill. Since then, payers have paid out billions of dollars for these therapies and expectations are that spending will surge even higher next year as prices increase for drugs treating other common conditions and diseases.
According to the Memorial Sloan Kettering Cancer Center, the vast majority of recently approved cancer drugs, many of which are complex biologics targeting specific genes, now cost six figures annually, up from less than $10,000 in 2000.
Next year, Medicare insurers are also faced with the prospect of spending hundreds of millions of dollars more on new cholesterol-busting medicines that will be used alongside statins in tough-to-treat patients. This new class of cholesterol-lowering drugs, known as PCSK9 inhibitors, have a wholesale cost that's north of $14,000 per year and that's far north of the hundreds of dollars per year currently charged for generic statins.
Looking forwardThe surging cost of prescription medicine has put payers and patients in a tough spot. Insurers need to keep costs down so that premiums don't increase too quickly, but they also need to protect their already thin margins in order to stay in business and, as a result, patients are being asked to pay more for their insurance and their medicine than ever before. That's an untenable situation given that it could mean seniors are faced with choosing between paying a monthly bill and filling a prescription.
Unfortunately, absent any substantial cost-lowering reforms, it's unlikely that insurance premiums are going to head lower anytime soon or that deductibles will stop climbing, and if that's true, then this upcoming increase may simply be the first of many to come.
The article Millions on Medicare to Pay More for Medicine in 2016 originally appeared on Fool.com.
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