Medicare Part D

Medicare Part D: A Success Story

Created in the Medicare Modernization Act of 2003, and formally implemented in 2006, Medicare Part D provides affordable outpatient prescription drug coverage for seniors and people with disabilities.

Part D has succeeded beyond expectations, delivering needed prescription medicines at a far lower cost than anticipated due to rigorous competition in the program. Recent evidence attests to the program's success:

  • Costs $348 billion (or 45 percent) less than initial 10-year projections, according to the Congressional Budget Office (CBO)
  • CBO has reduced its successive 10-year cost projections for Part D by over $100 billion in each of the last three years
  • 94 percent of beneficiaries are satisfied (source: MedPAC)
  • Low-income beneficiaries have access to medicines at little to no cost
  • The average monthly beneficiary premium is projected to be $31 in 2014, roughly less than half the $61 originally forecasted
  • Improved medication adherence connected with the expansion of drug coverage under Part D led to about a $2.6 billion reduction in medical expenditures annually among beneficiaries diagnosed with congestive heart failure and without prior comprehensive drug coverage, according to a recent study.

The Part D program is unique in that private plans submit competitive bids each year to determine that cost of the benefit, rather than government-set pricing. Private Part D plans compete to deliver affordable coverage for beneficiaries while also providing value for federal taxpayers. Medicare Part D plans also negotiate discounts and rebates with drug manufacturers to achieve savings on medicines, and use them to help reduce premiums, deductibles, and cost-sharing for Medicare beneficiaries.

With a wide range of available plans, beneficiaries can choose one that best meets their coverage and financial needs and, in turn, they are better able to adhere to prescribed treatment regimens. Studies have shown better adherence  to medicines improves overall health and can help reduce costly, avoidable hospitalizations.

Improving Access

A 2011 Journal of the American Medical Association (JAMA) study  found that for those with limited prior drug coverage who subsequently enrolled in Part D, there was an average savings of $1,200 per beneficiary in total non-drug medical costs in both 2006 and 2007. These offsetting savings coupled with the fact that 11 million seniors gained comprehensive prescription drug coverage when Part D was implemented implies an overall savings of $13.4 billion on other Medicare services in 2007, the first full year of the program.

CBO has even changed its cost estimating methodology to reflect evidence that increased prescription medicine use leads to offsetting reductions in Medicare spending for other medical services.

Medicare Part D serves as an example of how a healthcare program runs efficiently and delivers the services and treatments it promised.

More On PhRMA — powered by PhRMApedia