Ins and Outs of the Successful Medicare Part D Program

By: Jennifer W. Cline, Advocacy & Strategic Alliances, PhRMA

****Reprinted with permission****

Medicare is the federal government program that insures many of America’s retirees and people with disabilities. Medicare Part D was implemented in 2006 to provide affordable prescription drug coverage to seniors and people living with disabilities. There are many parts to this very successful program.

Today, more than 40 million Medicare beneficiaries in the United States benefit from this program. In 2017, there are, on average, 22 Part D plan choices available in every region across the country.[i] This 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.

As we enter the fall and open enrollment season, it is important to keep Medicare Part D protected, so it can continue to serve the vulnerable American populations who need it most.

Did You Know Medicare Part D offers financial assistance to those who qualify under the “Extra Help” or “Low Income Subsidy (LIS)” Program?

• The program helps about 11.5 million low-income Part D beneficiaries by waiving or lowering their premiums and deductible, and reducing their cost sharing for individual prescriptions.
• On average, LIS beneficiaries are in poorer health than non-LIS patients.[ii] LIS beneficiaries often have multiple conditions or diseases and are more likely to be disabled than beneficiaries overall.[iii] Additionally, the overall disease burden is greater for LIS enrollees than non-LIS enrollees across multiple disease categories, including diabetes, chronic heart failure, chronic kidney disease and COPD.[iv]
• Unfortunately, harmful changes to this important aspect of the Part D program have been proposed, including increasing copays for brand medicines used by beneficiaries who receive Extra Help.
• Proponents of this idea say it is intended to increase use of generic medicines, however even MedPAC has noted that generic drug use among Part D enrollees – including beneficiaries receiving Extra Help – is already high. In fact, according to MedPAC, in 2014 83 percent of prescriptions filled by beneficiaries receiving Extra Help were for generics.[v]
• Higher copays for Extra Help beneficiaries could also limit patient and provider choice, forcing changes in prescribed treatment even if it is not medically appropriate. In many therapeutic classes, substitution between a brand name drug and a chemically different generic is not medically appropriate. Policies that put patients at risk by forcing them to take a medicine other than the one their physician prescribes may do more harm than good by reducing adherence, which could in turn lead to poor health outcomes and increase total health care spending.

Did you know that negotiations already happen in the Part D program, helping reduce overall costs?

• Part D is a competitive private market, rather than a system with government-set pricing. Private Part D plans negotiate substantial discounts and rebates with drug manufacturers, without the government meddling. According to a recent study, these substantial rebates have resulted in an average 35.3 percent discount from manufacturer list prices across 12 widely used therapeutic areas in Part D.[vi]
• The Medicare Trustees have also repeatedly said negotiated discounts and rebates are substantial and continue to grow. In fact, the 2017 report shows rebate levels increased to 18.2 percent in 2015.[vii] There is broad agreement the Secretary of HHS could not negotiate lower prices. The Congressional Budget Office (CBO) has repeatedly found that “the Secretary would be unable to negotiate prices across the broad range of covered Part D drugs that are more favorable than those obtained by [Prescription Drug Plans (PDPs)] under current law.”[viii] And the Office of the Actuary at the Centers for Medicare & Medicaid Services (CMS) has come to the same conclusion.

Did you know that Part D’s competitive structure has kept costs affordable and beneficiary satisfaction rates high?

• Medicare beneficiaries have enjoyed relatively stable monthly Part D premiums. CMS estimates that the average monthly Part D premium for 2018 will decrease to $33.50 – roughly a dollar less than the average monthly premium in 2017.[ix]
• Part D costs are $349 billion (or 45 percent) less than initial 10-year projections, and Part D made up just 13.7 percent of total Medicare spending in 2016.[x]
• 87 percent of Part D prescriptions are generic[xi] (up from about 50 percent before the program was implemented)[xii], keeping costs low.
• Multiple studies have shown about 9 in 10 Medicare beneficiaries are satisfied with their Part D coverage.[xiii]

And did you know that the affordable access provided by Part D helps improve beneficiaries’ overall health and reduces the use of other costly and avoidable health care services?

• A recent study found, since 2006, nearly 200,000 Medicare beneficiaries have lived at least one year longer, with an average increase in longevity of 3.3 years. On average, 22,100 lives were saved each year between 2006 and 2014, primarily from fewer deaths from medication-sensitive conditions like diabetes and cardiovascular disease.[xiv]
• A study in the National Bureau of Economic Research reported gaining Medicare Part D coverage was linked to an 8 percent decrease in hospital admissions for seniors.[xv] Gaining coverage also helped improve treatment adherence for enrollees with congestive heart failure, leading to more than $2.3 billion in annual Medicare savings.[xvi]

Medicare Part D helps retirees and people with disabilities live longer, healthier lives and is a vital component of our nation’s health care system.  Serving people who need it most, Part D must be protected and strengthened in the years to come.


Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association, but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about public health-related issues and updates.


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[i] Kaiser Family Foundation, “Medicare Part D: A First Look at Prescription Drug Plans in 2017,” October 2016. http://kff.org/report-section/medicare-part-d-a-first-look-at-prescription-drug-plans-in-2017-findings/
[ii] Medicare Payment Advisory Commission, “Report to Congress: Medicare Payment Policy,” March 2012.
[iii] Ibid. 
[iv] Stuart BC, et al. University of Maryland and PhRMA Chartbook: Medication Utilization Patterns and Outcomes Among Medicare Part D Enrollees with Common Chronic Conditions. September 2014. p. 16-17. https://www.pharmacy.umaryland.edu/media/SOP/wwwpharmacyumarylandedu/centers/lamy/pdf/Part_D_Chartbook_Final_2014.pdf.; BC Stuart et al. Why Do Low-Income Subsidy (LIS) Recipients Have Higher Part D Drug Spending? Poster presentation at AcademyHealth Annual Research Meeting, June 2014 San Diego. 
[v] Medicare Payment Advisory Commission, “Report to Congress: Medicare Payment Policy” March 2017, p. 410. 
[vi] QuintilesIMS Institute, “Estimate of Medicare Part D Costs After Accounting for Manufacturer Rebates,” October 2016. http://www.imshealth.com/files/web/IMSH%20Institute/Reports/IIHI_Estimate_of_Medicare_Part_D_Costs.pdf
[vii] https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2007-Press-releases-items/2007-01-11.html
[viii] Remarks of CBO Director Dr. Douglas Elmendorf before the Senate Finance Committee, February 25, 2009 https://www.finance.senate.gov/imo/media/doc/62182.pdf
[ix] CMS press release, “Medicare Issues Projected Drug Premiums for 2018,” August 2, 2017.
[x] See CBO Medicare Baselines available at www.cbo.gov
[xi] Medicare Trustees. The 2017 annual report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. July 2017:143(footnote 66).
[xii] Pharmaceutical Research and Manufacturers of America analysis based on IMS Health, Vector One®: National Audit data. Data extracted September 21, 2012.
[xiii] Morning Consult Survey for Medicare Today, “Nearly Nine in10 Seniors Satisfied with Medicare Part D,” July 2016; MedPAC, Report to Congress: Medicare Payment Policy, March 2013, p. 345.
[xiv] Semilla, et al., “Reductions in Mortality Among Medicare Beneficiaries Following the Implementation of Medicare Part D,” The American Journal of Managed Care, Vol. 21, No. 9, Sup., July 2015.
[xv] Kaestner R, Long C, Alexander C. Effects of prescription drug insurance on hospitalization and mortality: evidence from Medicare Part D. The National Bureau of Economic Research. http://www.nber.org/papers/w19948. Published February 2014.
[xvi] Dall et al., “The Economic Impact of Medicare Part D on Congestive Heart Failure,” The American Journal of Managed Care, May 2013.