Medicare Part D: A Report Card

By Tom Scudder

11/09/2011

What was the goal of Medicare Part D?

On December 8, 2003, then-President George W. Bush signed into law H.R. 1, also known as the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.

Under this legislation, the Medicare Program underwent the largest overhaul in the program's history, including changes to the fee structure, adjustments for health savings accounts, increased support for medical technology, and several other important changes.

The Medicare Modernization Act's most highly touted benefit, though, was the creation of Part D, a prescription drug benefit plan. This drug plan is not available directly through Medicare, but through a managed care organization and private prescription drug plans.

As with other Medicare plans, beneficiaries are eligible to join a prescription drug plan during open enrollment period each year, typically in November and December.

What was the problem it addressed, and how did Part D fix it?

Part D was designed as a voluntary prescription drug benefit program available through private insurance companies to existing Medicare beneficiaries.

Between the enactment of original Medicare in 1965 and the adoption of the Part D benefits in 2003, prescription drugs usage significantly increased its role in patient care in the United States healthcare system.

In the last ten years before the passage of the MMA alone, prescription drug expenditures for those eligible for Medicare doubled, according to the Centers for Disease Control's historical health data.

If Medicare was going to continue to function as the chief healthcare provider for American seniors, it would have to modernize to address the rising costs of prescription drugs.

Has it accomplished that goal?

So has Medicare Part D accomplished its original goal of cutting the cost of prescription drugs for enrollees? James Capretta, of the conservative National Review, reports that 90% of Medicare beneficiaries are enrolled in some type of Part D coverage plan, so the plan's popularity can hardly be called into question.

In a 2008 study published in the journal Pharmacy Practice, 80% of surveyed Medicare recipients who enrolled in Part D during open enrollment in late 2006 indicated that they were satisfied with the decision.

Another survey done by the nonpartisan Medicare Today, a Medicare resource partnership, found that 88% of Part D enrollees report being satisfied with their prescription drug coverage.

In an era of partisanship surrounding government programs, especially Medicare, such an overwhelming satisfaction rate with a government-sponsored program is a sure indicator of success.

Despite high rates of participation, it is still difficult to judge a government program purely on participant satisfaction. Cost is always a factor. In the Medicare system as a whole, there is an enormous return on investment for enrollees.

According to David Brooks of the New York Times, the average 56-year-old couple pays roughly $140,000 into Medicare over a working lifetime, but receives about $430,000 in benefits.

Another 80% of respondents say that premiums and co-payments for prescription drugs are affordable as well as provide good value for the money, according to Mary Grealy of Forbes Magazine.

Both figures represent a tremendous value for Medicare enrollees. Grealy also cites an average monthly premium for program enrollees of only $30. Overall, she claims, the Medicare Part D program has cost $35 billion less than was originally projected in 2003, which has helped keep the program popular amongst taxpayers and politicians alike.

These savings are largely driven by competition between private insurance firms. Because Medicare Part D is not offered directly through the federal government, but rather, through private insurance companies, competition between companies on the open market has acted as a check against rising plan prices.

According to the Centers for Medicare & Medicaid Services, there are currently just over 2,000 prescription drug plans available for Part D enrollees. In a prescription drug market where costs are always rising, having that much competition is essential to keeping plans affordable.

How has Part D changed since its creation?

On the whole, according to James Capretta, "Part D has been a phenomenal success story." The program has not been without its share of changes, however.

Many of these changes have been enacted to help with costs and coverage for enrolled seniors. Most notably, 2011 marks the beginning of the end for the infamous "donut hole" in Part D coverage.

The donut hole is the break in coverage after you have received the maximum regular drug benefit, but you have not reached the limit for out- of-pocket drug costs that represents catastrophic event coverage.

According to the Department of Health and Human Services, the donut hole will begin to close in the next decade, starting with a 50% discount in the form of a rebate on covered brand name drugs purchased while in the donut hole.

By 2020, under the recent healthcare legislation, the donut hole will close, fully eliminating those out-of- pocket drug costs for seniors. The closing of the donut hole represents the most sweeping change to Part D since its passing in 2003.

Source: www.medicarehealthplan.org/part-d-medicarerx/part-d-report-card