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Medicare Part D Delivers For Seniors And Taxpayers

by Keith Fontenot, Executive Vice President, Policy and Strategy, AHIP

January 9, 2019

Americans should be able to get the prescription drugs they need at a price they can afford—and consistently, Medicare Part D has delivered for them. For more than 10 years, Medicare Part D has improved access to prescription drugs and reduced out-of-pocket costs for millions of seniors and people with disabilities. Today, more than 44 million people receive their prescription drug coverage through Medicare Part D.

Seniors have many choices among Part D plans. Because of this high level of competition, insurance providers succeed only by offering high-quality plans that provide both access and affordability. Coverage providers keep costs low for seniors and taxpayers by negotiating discounts with drugmakers and encouraging seniors to use effective, more affordable drugs.

The result has been more savings for consumers. Part D premiums have essentially remained flat and are far below initial projections from the Congressional Budget Office. CMS has estimated that premiums would decline by 3 percent to $32.50 per month in 2019 for the basic benefit. This stability has continued even as drug prices remain out of control—a June 2018 report from the HHS Office of Inspector General (OIG) found that costs for brand-name drugs in the Medicare Part D program rose nearly six times faster than inflation from 2011 to 2015.

Rigorous Oversight of Part D Plans

Part D works thanks to high standards, rigorous government oversight, and the existence of clear protections for beneficiaries. Part D coverage providers submit “bids” to the Centers for Medicare & Medicaid Services (CMS) estimating how much it will cost them to provide a plan. These bids are based on past experience, as well as projections about how drug costs will trend in the future.

Each and every plan bid is reviewed and approved by a certified actuary. The federal government—through CMS—must approve every plan before it is offered to seniors. No exceptions.

Part D coverage providers work hard to submit accurate, competitive bids. And they’re improving with time and experience. In fact, CMS has observed that more recent data shows bid estimates are coming closer to actual costs.

Part D Delivers Real Value

A recent story in the Wall Street Journal incorrectly implied that health insurance providers are intentionally submitting inaccurate Medicare Part D bids for their own gain. You can read our letter in response here. But in fact, the Medicare Part D program is demonstrating the success of relying on a competitive market to promote better access to affordable health care services.

The program’s shared risk structure saves taxpayers money by providing a line of defense against future price hikes and Solvaldi-like cost increases. That means lower costs for consumers. The risk structure has brought net savings of nearly $9 billion to the government since the start of the program. Changing this model would mean costs go up for seniors and taxpayers alike. It’s an immensely valuable program—one worth protecting.

Part D coverage providers are accountable to both seniors and hardworking taxpayers. These providers will continue to work with CMS to ensure that Part D delivers lower prices, more choice and better care for all Americans.