MedicarePart D

What is Medicare Part D?

Created by the Medicare Modernization Act (MMA) of 2003, and formally implemented in 2006, Medicare Part D provides affordable prescription drug coverage to seniors and people living with disabilities. For over 10 years, the program has been successful for both beneficiaries and taxpayers and has worked well thanks to robust competition and choice. Today, more than 40 million people are enrolled in Medicare Part D.

Part D’s Success Relies on Private Market Competition

The Part D program is unique in that its market-based structure of private-sector competition and robust negotiation has struck the balance between promoting access and controlling costs. Medicare Part D plans compete to deliver affordable coverage for beneficiaries while also providing value for taxpayers. To do so, private plans competitively bid each year, attracting beneficiaries through low premiums and quality coverage. This structure also allows beneficiaries to 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.

Medicare Part D plans also commonly negotiate significant rebates to achieve savings on medicines; in fact, the average rebate in Part D is 35%.

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Part D Benefits Patients and Taxpayers

By expanding coverage for Medicare beneficiaries, Part D has increased access to needed medicines and led to an improvement in patient adherence to their treatments. When seniors are more adherent to the medicines that treat their conditions, that results in fewer doctor’s visits and less or shorter hospitalizations – all of which not only improves patient health but also helps keep costs down in the overall health care system.

Additionally, Medicare Part D beneficiaries have enjoyed low and stable average monthly premiums since the program began, from an average monthly premium of $23 in 2006 to $33.50 in 2018. And overall Part D program costs are actually lower than initially predicted by 45%, coming in at nearly $350 billion less than the Congressional Budget Office’s initial 10-year estimate.

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Strengthening Part D

For more than a decade, seniors have had the option to buy prescription drug coverage through Medicare Part D to meet their health care needs. That is why nearly 9 in 10 beneficiaries remain satisfied with the program. But Medicare Part D could work better for some seniors who find themselves facing out-of-pocket affordability challenges due to high cost sharing at the pharmacy counter, high annual out-of-pocket costs and uneven distribution of these costs throughout the year.  

In order to strengthen Part D, Congress and the Administration should focus on what seniors care about the most: improving affordability and predictability. Doing so could lower out-of-pocket costs for millions of beneficiaries, generate savings for the federal government and strengthen the already successful Part D program.

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