Even Critics Cannot Ignore Medicare Part D’s Successes

Last Thursday, the independent actuaries at the Centers for Medicare and Medicaid Services (CMS) announced that the projected costs of the Medicare drug benefit continue to be significantly lower than earlier estimates.  This announcement highlights the continuing success of the Medicare drug benefit in lowering prescription drug costs and expanding Medicare beneficiaries’ access to prescription drugs. 

According to the CMS actuaries, the cost of the Medicare drug benefit (known as Part D) will be $117 billion lower over the next 10 years, compared to the estimate that was prepared just last summer.

Ø      This is the third year in a row where Part D cost projections have decreased. 

Ø      Compared to its initial estimate in 2003, the next ten year cost of the Medicare drug benefit is nearly $250 billion (almost 40%) lower than originally estimated.

Ø       In 2003, Administration actuaries estimated that the program would cost $634 billion for 2004-2013, while their most recent estimate projects that the cost for that same time period will now be $390 billion.

The success of Part D stands in stark contrast to the dramatic increases in overall healthcare spending during the same time period.

Ø      According to a recent report in the policy journal Health Affairs national healthcare spending increased by 6.7 percent in 2006.

Because private Medicare drug plans are forced to compete, and beneficiaries have the right to choose among these competing plans, Part D plans have been able to slow the rate of drug cost increases, lower plan spending and increase the rebates they receive from drug manufacturers.

Despite Rep. Emanuel’s claim that Part D is a “Republican legislative failure,” it is time to realize that Congress got this one right.

Ø      Today, nearly 90 percent of Medicare beneficiaries (39.5 million) have prescription drug coverage, including 1.5 million enrollees who signed up within the last two months. 

Ø      Enrollees are now saving roughly $1,200 annually off of their prescription drugs costs.

Ø      The average Part D premium in 2008 is roughly $25.  Democrat amendments in 2003 sought set monthly premiums at $35 monthly premium.  Had these amendments passed, seniors would be paying $120 more each year for their drug coverage.

Ø      Independent surveys consistently show that more than 85 percent of seniors are happy with their new drug coverage. 

How is it that, unlike virtually every other sector of the health care industry, costs are falling?  Because competition is working.  In competing for seniors’ business, plans have an incentive to negotiate deep discounts and keep monthly premiums low.  Compare this model with the outdated traditional government-run Medicare program, where monthly premiums are reaching unaffordable levels and the program is going bankrupt in just 12 years. 

# # #