How can a health insurance plan offer increased benefits from one year to the next while simultaneously lowering premiums? Simple: Taxpayers pay the difference.
Such are the results from the “premium stabilization demonstration” — read: bailout — of the Medicare prescription drug program that the Biden administration announced this summer. While Kamala Harris, Biden’s putative successor, and Democrats will breathe a sigh of relief at the news of premium reductions, taxpayers will end up the losers from this costly giveaway to insurance companies.
Bailout to Counteract Skyrocketing Premiums
The latest developments come as a consequence of the (misnamed) Inflation Reduction Act that Democrats passed in 2022. The richer benefits — a new cap on seniors’ out-of-pocket drug expenses, coverage of vaccines, etc. — coupled with structural changes to the Part D pharmaceutical benefit, would on their own lead to significant premium increases.
In fact, premiums for standalone Part D plans — that is, plans that only cover prescription drugs — rose by an estimated 21 percent from 2023 to 2024, and the number of plans and firms offering plans each dropped to all-time lows. When plans made their bids for 2025, the Centers for Medicare and Medicaid Services (CMS) admitted that insurers’ “resulting premium changes could create disruptive enrollment shifts.” In other words, the Biden administration and Democrats faced the prospect that millions of seniors could receive word of major premium spikes, and/or insurers dropping coverage entirely, when Medicare open enrollment starts on Oct. 15, just weeks before the election.
