Medicare Part D
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 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 $349 billion (or 45 percent) less than initial 2004-2013 projections, according to figures from the Congressional Budget Office (CBO)
- CBO reduced its current 10-year baseline forecast for total Part D spending by $56 billion in 2014, which followed three consecutive years in which CBO annually lowered its 10-year Part D forecast by more than $100 billion
- Nearly 90 percent or more of beneficiaries are satisfied with the program (source: MedPAC, Medicare Today)
- Low-income beneficiaries receive assistance to cover premiums and deductibles, and reduced cost-sharing
- The average monthly beneficiary premium is about $32 in 2015, roughly half the $60 originally forecasted
- Improved medication adherence due to expanded 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 2013 study
- Another study found that gaining Medicare Part D prescription drug coverage was tied to an 8 percent decrease in hospital admissions for seniors and approximately $1.5 billion in aggregate savings to Medicare yearly
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 individual 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.
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 in Part D 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.