Retirees with stand-alone Medicare drug plan coverage not subject to low-income subsidies are likely to see increases in their monthly premiums next year as the Inflation Reduction Act begins to take effect. The legislation adopted in 2022 includes limited authority for Medicare to negotiate drug prices, but also reduces the share of so-called catastrophic drug costs currently borne by taxpayers, shifting more of the expense to insurers and, by implication, to enrollees in the form of higher premiums.
Medicare prescription drug plans, known as Medicare Part D, are separate private insurance plans that accord with Medicare guidelines to provide coverage for prescription medications and are not part of traditional Medicare. About 44% of Medicare beneficiaries with drug coverage purchase a separate stand-alone plan and will incur an average price increase of 20% next year, according to the Kaiser Family Foundation. Tennesseans can expect a 21% average monthly premium increase, while Georgians will get socked with a 32% hike on average.
The remaining 56% of covered retirees get their drug coverage as part of a Medicare Advantage (Part C) private insurance plan and are likely to see smaller increases due to the financial incentives from Medicare to Part C providers. But Medicare Advantage plans have some disadvantages and are under increasing scrutiny for allegations denial of coverage and advertising practices, so many retirees opt to purchase more flexible Medicare supplement or “Medigap” policies coupled with stand-alone Part D drug coverage at a higher cost to keep their options open.
(READ MORE: Healthy choices for individual Tennesseans buying health insurance for 2024)
Medicare remains one of the most popular government subsidy programs in existence, with 65 million participants comprising 21% of all U.S. health spending. It is also one of the biggest budget busters, representing 10% of all federal outlays and expected to reach 18% by 2032, just as the Medicare trust fund runs dry, according to plan actuaries. Beneficiary premiums comprise only 15% of program revenue; payroll taxes and general tax revenue make up most of the rest, which is still not sufficient to pay all the bills.