Medicare Part D: A Success Story


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

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09/21/2015 - 09:21

When looking at spending numbers, it’s always important to keep costs in context. Learn what certain items and services, such as prescription drugs, look like as a percent of total Medicare program spending.

Learn more about Part D Extra Help - also known as Low-Income Subsidies (LIS) - in our new video.


ASP is a market-based price that reflects the weighted average of all manufacturer sales prices and includes all rebates and discounts that are privately negotiated.

In 2012, the CBO began recognizing reductions associated with increased use of prescription medicines in Medicare.

Benefit to Patients

By increasing access to needed medicines, Part D helps improve beneficiaries’ overall health and reduce the use of other costly and avoidable health care services, such as hospitalizations. For example, Part D coverage was linked to an 8 percent decrease in hospital admissions for seniors, according to a 2014 National Bureau of Economic Research study. Gaining Part D coverage also improved adherence among enrollees with congestive heart failure, which led to over $2.3 billion in annual savings to Medicare, driven by reductions in Parts A and B expenditures. Additionally, Medicare beneficiaries have enjoyed relatively stable average monthly Part D premiums (just $32 in 2015 – up just $1 from 2014), which helps keeps coverage affordable.

Success of the Program

Part D has succeeded beyond expectations, delivering needed prescription medicines at a far lower cost than anticipated due to rigorous competition in the program. According to figures from the Congressional Budget Office (CBO), total program costs are $349 billion (or 45 percent) less than initial 2004-2013 projections. And in 2014, Part D represented just 10.9 percent of total Medicare spending. Another testament to the program's success: about 90 percent or more of beneficiaries are satisfied with the program (source: MedPAC, Medicare Today).

Competition and Choice

The Part D program is unique in that private plans submit competitive bids each year to determine the 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 taxpayers. Medicare Part D plans also negotiate significant discounts and rebates with drug manufacturers to achieve savings on medicines, and use them to help reduce premiums, deductibles and cost-sharing for beneficiaries. With a wide range of available plans – more than 1,000 plans available nationwide, with an average of 24 plans to choose from in every region in 2015 – beneficiaries can choose a plan that best meets their individual coverage and financial needs and, in turn, they are better able to adhere to prescribed treatment regimens.