The Bush administration says competition between private Medicare Part D prescription plans will help participants pay 41% less in premiums in 2007 than originally projected.

Net Medicare costs for the fiscal year 2008 budget cycle are about 30% less than analysts were predicting when the program was created in 2003, and that will translate into $189 billion in savings, according to Michael Leavitt, secretary of the U.S. Department of Health and Human Services.

For enrollees who remain in their current plans, average monthly premiums will fall to $22 in 2007, from $23 in 2006, Leavitt reports.

The initial estimate for 2006 premiums was $37.

“Our new estimates provide clear evidence that consumer choice is working,” Leavitt said today. “Government interference will result in fewer choices and less consumer satisfaction. Actuaries have told us that government interference will not lead to lower drug prices either.”

Leavitt spoke as the Bush administration was preparing for a vote scheduled for Friday on H.R. 4, a bill that calls for the secretary to negotiate directly with drug manufacturers for lower Medicare drug plan medication prices.

Democrats appear to have the votes to get the bill through the House, but getting the bill through the Senate could be more difficult.

In a Senate floor speech today, Sen. Charles Grassley, R-Iowa, former chairman and now ranking minority member of the Senate Finance Committee, disputed the need for the House bill.

“Everyone has heard the old saying that, ‘If it ain’t broke, then don’t fix it’,” Grassley said. “And this certainly applies here and the evidence shows it.”

The Senate Finance Committee will hold a hearing on the issue Thursday.

Currently, the 2003 law setting up the drug benefit program under Medicare bars the government from negotiating prices directly with drug manufacturers. H.R. 4,, introduced by Rep. John Dingell, D-Mich., chairman of the House Energy and Commerce Committee and 190 co-sponsors, would strike that provision and “direct” the Secretary to negotiate drug prices directly with drug manufacturers.

Grassley said he would be the “first to say the program is not perfect.”

“There are improvements that can be made,” Grassley said.

Grassley, a principal author of the bill that created the Part D program, said he hopes Congress can revisit some important features left out of the actual program.

Congress should look at ways to make it easier for low income beneficiaries to get the additional assistance they need by eliminating the low-income subsidy asset test, Grassley said.

Congress also should also revisit provisions dealing with payments to pharmacies and make some reforms in that area, and also look at ways to simplify the enrollment process, Grassley said.

“But one area that is working very well is the negotiating power of Medicare drug plans,” Grassley said. “They have shown their ability to hold down costs. It’s working.”