Specific costs and information on what drugs will be covered will be known to the government in September, when private companies sign contracts with Medicare.

The announcement could take some of the sting out of mounting criticism the administration has suffered in recent weeks from senior citizens and consumer advocates who have complained about the lack of details available about the Medicare drug benefit. Enrollment for the program begins in November.

Some seniors have gone so far as to say they may not sign up because they are so confused.

The lower-than-expected premiums are the result of insurance companies' negotiations with drug manufacturers to promote the use of cheaper generic medicines and related competition among plans that will contract with the government, said Mark McClellan, head of the Centers for Medicare and Medicaid Services. The premium was projected in March to be $37.37 a month.

"Lower premiums should make the benefit more attractive to more people," McClellan said. He said the Medicare program still is negotiating with insurance companies and has not yet approved bids for the drug benefit program.

Consumer Activists Reserving Judgment

The cost to the government now amounts to "billions of dollars in reduced costs to taxpayers in the first year of the program," a statement from the Centers for Medicare and Medicaid Services said.

As many as 30 million of Medicare's more than 41 million elderly and disabled enrollees will sign up for the drug benefit beginning Nov. 15, according to government and private estimates.

But senior activists and consumer groups say they still are troubled with the new benefit and are reserving judgment until they see specific details, which are not expected until October, when health plans can begin marketing their programs for the drug benefit.

"Without the ability to look at the premium in the context of the entire plan, it is difficult to judge exactly how good this is for consumers," said Lynda DeLaforgue, co-director of the consumer group Citizen Action Illinois. "Also, there are no guarantees about what will happen to the prices in the future.

"It's like the cable companies who sign you up for three free months of cable to entice you into their plan and then you get socked with the higher rates down the road."

Need Large Numbers of Senior Citizens

Seniors who sign up will get a card for prescriptions from a third-party company, such as a health insurance plan or pharmacy benefit company, with benefits slated to begin Jan. 1. Some of the biggest names in the health insurance business are proposing to offer benefits, including Blue Cross and Blue Shield plans, Aetna Inc. and UnitedHealth Group.

The health insurance industry, which has a large financial stake in the new drug benefit program, was pleased that its involvement helped win a lower premium for seniors.

"It's a validation of the cost-containment tools of the private sector," said Karen Ignagni, chief executive of America's Health Insurance Plans, the Washington-based lobby for the health insurance industry.

To be sure, the health plans need large numbers of senior citizens to participate in order to spread their costs and make the program viable.

The drug benefit, which is expected on average to provide $1,300 a year in coverage per senior, is a pricey program, with costs that before Tuesday had been projected at more than $720 billion during the next 10 years.

Although specific costs such as co-payments and deductibles will not be available until October when health plans begin marketing, seniors have expressed displeasure with the details that are thus far available.

Penalty for Not Signing Up Early

A 12 percent annual penalty tacked onto seniors' premiums for not signing up early is among the plan's prominently mentioned features in the early marketing materials from health plans and pharmacies. The penalty would not affect certain seniors who have employer or union drug coverage that is richer than Medicare's, officials said.

The new projected savings would wipe out the impact of the penalty in at least the first year.

"It is not trivial in that this is an important savings for consumers," said Ralph Yaniz, state director of AARP Illinois.

Premium costs do not include certain out-of-pocket expenses such as co-payments and deductibles, which will vary among the many private plans that will contract with Medicare.

Specific costs and information on what drugs will be covered will be known to the government in September, when private companies sign contracts with Medicare.

While seniors and consumer groups were happy with the projected cost savings, it is not a given that health plans will keep the costs of the Medicare drug benefit in check in the future.

"It is something that we can celebrate now, but we don't know if it's going to translate into ongoing savings beyond the first year," Yaniz said.