Medicare Part D is Working – Leave it Alone

By September 30, 2011Health Care

Medicare Part D, the prescription drug program for America’s seniors, is a unique success story in how a government program can work effectively by harnessing the efficiencies and strengths of our private sector. Reformative in its approach, the program relies on the private sector to negotiate prices, set premiums and compete for customers on a level playing field.

Unfortunately, there are some in Congress who are pushing proposals that will undermine this popular program. With a 90 percent satisfaction rate among beneficiaries and a programmatic budget 40 percent below cost estimates, where is the wisdom in tinkering with it?

The “Super Committee” is tasked with finding $1.2 trillion in savings and one of the ideas is to impose new “rebates” on the manufacturers of the medicines low-income seniors use in the program. The justification requires a short history lesson.

Under the old system, some beneficiaries received their medicines through Medicaid because they were considered low-income first and seniors second. Under Medicaid, companies have to provide a rebate to the program for the volume of medicines used by its beneficiaries. Under the new Part D program, we treat seniors as seniors first and low-income second. The rebates previously siphoned off to the government have actually gone into discounts to the Part D plans making the program stronger and less expensive for beneficiaries. This is one of the many reasons the program is successful and highly popular among beneficiaries.

Manufacturers are concerned about the impact these new rebates would have on the Part D program, because if adopted, they will force companies to reduce their current Part D discounts and possibly raise prices in other markets.  Higher premiums for Medicare beneficiaries will upset the program, increase the overall cost of it and create upward pressure on the remaining private market – employer-sponsored health plans– which will bear the brunt of this misguided policy.

Policymakers need to be wary of seemingly simplistic proposals. There are intended consequences and unintended. The rebate idea is fraught with unintended consequences and threatens to de-stabilize a program that is under budget and very popular. Congress and its “Super Committee” would be wise to search elsewhere for savings.

Joe Trauger is vice president of human resources policy, National Association of Manufacturers.

Leave a Reply