Medicare Part D costs dropping? Don't hold your breath

Good news for the Bush administration today: monthly premiums for the Medicare prescription drug benefit will be $5 or so less than expected due to lower bids from health insurers. CMS Administrator Mark McClellan and HHS Secretary Mike Leavitt were busy touting the positive announcement --and major media ran the story.Cost savings news from these sources needs to be treated with suspicion. Here's an excerpt from the Kaiser Family Foundation:

John Gorman, a consultant on Medicare issues, said the companies seeking to provide prescription drug coverage under Medicare were holding down premiums for now to "secure market share in the first year of the program," even though that might mean lower profits. He added that doing so is a good strategy for 2006 and 2007, when the federal government will protect providers against large losses related to the new benefit. However, Gorman said, "I don't think that will last for long. You will see more realistic pricing -- higher premiums -- in 2008" (New York Times, 8/10).