The Impact of Enrollment in the Medicare Prescription Drug Benefit on Premiums

This Kaiser Family Foundation study estimates the potential impact in monthly Medicare drug premiums if enrollment does not reach 29 million in 2006 as the Congressional Budget Office (CBO) assumed, and if those who do enroll have relatively high total prescription drug costs.

The study, prepared by Avalere Health LLC and based on a model developed by Actuarial Research Corporation, looks at various participation scenarios for the beneficiaries who are projected by the Congressional Budget Office (CBO) to enroll in a Medicare drug plan in 2006. The paper examines the effects of varying enrollment on monthly premiums and federal costs of the Medicare prescription drug benefit, particularly if beneficiaries with relatively low drug spending do not enroll.

This analysis solely focuses on the impact of various participation scenarios, based on beneficiaries’ prescription drug costs, on average Medicare prescription drug plan premiums. The analysis holds constant other factors that also could affect average plan premiums in the future, including drug prices and utilization, and other market dynamics that could affect plan participation. These factors were held constant to illustrate the implications of various beneficiary participation scenarios on Medicare drug plan premiums.

The study was prepared for the Kaiser Family Foundation by Jonathan Blum, Jennifer Bowman, and Chiquita White of Avalere Health LLC.

Report (.pdf)