Improving seniors’ health and saving billions

Medicare’s Part D success story.

by Robert B. Blancato

Lawmakers in Washington, D.C., are currently examining federal expenditures, searching for programs to trim and adjust.

Medicare Part D, the prescription drug benefit for seniors, is one program that should serve as an inspiration to reformers –not a target for cuts. Not onlyhas the drug benefit managed to control costs, it has demonstrably improved seniors’ health.

Under Medicare Part D, seniors shop for their insurance plans from each state’s approved list. The government sets the guidelines, but doesn’t actually provide the insurance.

As a result, private insurance companies negotiate prices directly with drug companies and pharmacies, competing for seniors’ business by offering the lowest possible prices and the most possible options. When created, the idea was that competition would keep prices lower than government price controls could.

This structure has worked amazingly well. Part D is the rare entitlement program that has cost less than anticipated. Overall, costs have been about 45 percent below expectations, and seniors’ premiums are half what they were initially projected to be.

Part D’s success has been particularly beneficial to this region. Kentucky is home to 375,000 seniors on standalone Part D plans, and Indiana is home to 440,000. In both states, seniors can choose from among 31 different plans that cost an average of just $30 a month. Kentucky actually leads the nation in prescription drug use by seniors.

Saving Money
Research shows that improved prescription drug adherence through Part D is saving money elsewhere in the healthcare system.

A study in the Journal of the American Medical Association, found that when Part D went into effect, non-drug medical spending fell by an average $1,200 per year for seniors who previously had limited access to prescription drugs. By improving seniors’ health, Part D helped saved $13.4 billion in its first year.

Another study, conducted by researchers at Harvard, found that Part D significantly reduced hospitalizations for eight different conditions. Nationally, Part D eliminates the need for 77,000 hospital visits every year.

Part D Under Scrutiny
Despite these successes, Part D has come under scrutiny lately. In his budget, the President has proposed requiring drug manufacturers pay a rebate to the government on all Part D medicines sold to low-income seniors. But such a move could drive up premiums by as much as 40 percent for some beneficiaries, accordingto a former Congressional Budget Office (CBO) director.

The new Independent Payment Advisory Board, a powerful body charged with keeping Medicare costs in line, may also target Part D for spending cuts. Further cuts will jeopardize seniors’ access to drugs and raise prices for other customers.

Part D is worth preserving. It is economically efficient, and most importantly, provides crucial medications to our seniors at aaffordable prices.

Robert B. Blancato is the executive director of the National Association of Nutrition and Aging Services Programs.