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Medicare Part D premiums to rise slightly in 2008

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WASHINGTON--Premiums paid by beneficiaries enrolled in the Medicare Part D prescription drug program will increase only slightly in 2008, with the average premium far below what government actuaries originally estimated, a federal agency says.

Based on bids submitted by health and prescription drug plans that provide coverage through Part D, the Centers for Medicare and Medicaid Services anticipates that the average premium paid by beneficiaries for standard Part D coverage next year will be about $25 a month, up from $22 this year.

The estimated average monthly premium of $25 for 2008 is significantly below the $41 monthly premium government actuaries estimated in 2003, when Congress was considering the legislation to add a comprehensive drug benefit to the Medicare program.

CMS officials credit the lower-than-expected premiums to several factors, including greater use of generics and competition among participating plans.

"Medicare drug benefit bids continue to be well below projections because of slower-than-expected growth in prescription drug costs generally, in part because of increased generic usage, effective plan negotiation and strong competition," said CMS Acting Deputy Administrator Herb B. Kuhn in a statement.

Part D has been a boon to both employers with retiree health care plans and to retirees. Employers continuing prescription drug coverage that is at least as generous as Part D are eligible for tax-free government payments to partially offset claims costs. For retirees who lacked employer coverage for prescription drug expenses, Part D provides the coverage, with the federal government heavily subsidizing the cost.