The bad news is that safest place to be in Washington these days is between Chuck Schumer and the facts about Part D. Safe -- because it’s the path less traveled. Bad news because he has recently begun trumpeting the need for government price controls and extended rebates for duel eligibles as the “solution” to increased Medicare spending.
New York’s senior senator is living in talking point fantasyland.
The good news is that accumulating evidence shows that Part D is succeeding beyond all expectations, delivering needed prescription drugs to Medicare beneficiaries for less money than anyone expected—driven by strong competition among plans.
Consider:
Current CBO Estimates Show Part D Is Costing Far Less than Initial Estimates
* The 2011 CBO Medicare Part D baseline forecasts and actual recorded spending show costs for Part D benefit payments have declined by 46%, for the 2004 to 2013 period compared with initial estimates of the 10-year cost projections for those years.[i]
* Also this year, CBO reduced its baseline 10-year spending projections for all of Medicare by $186 billion, mostly due to lowered drug spending forecasts. CBO cites that “[a]pproximately two-thirds of the change comes from reducing the projected growth rate for Part D (prescription drug) spending per enrollee on the basis of an updated analysis of national trends in spending for prescription drugs.”[ii]
Part D Plan Bids Declined, Even as the Value of the Benefit Increased
The Affordable Care Act (ACA) significantly enhanced the value of Part D benefits by providing:
* a one-time $250 tax free check for beneficiaries with any spending in the gap in 2010
* a 50% discount on branded drugs while in the coverage gap beginning in 2011; and
* a phased-in closing of the remaining coverage gap by 2020 for both brand and generic drugs.
Despite these significant enhancements to the value of the benefit, Part D plan bids, for which plans need to be accurate since they are at risk, decreased for the 2011 plan year. According to CMS, the Part D National Average Monthly Bid Amount for 2011 is $87.05, a decrease of $1.28 (or -1.4%) compared with the 2010ii] Further, the Medicare Trustees estimate that “[f]or 2011 and beyond, the bids are projected to ultimately converge to between 1 and 2 percent lower than actual spending due to aggressive plan bidding.v]
Medicare Trustees Find Continued Robust Negotiation of Drug Rebates by Part D Plans
In analyzing Part D spending, the Medicare Trustees cite significant levels of rebates across the universe of drugs in the program, including brands and generics. In 2011 the Trustees reported, “rebates for 2009 were approximately 11.1 percent of total prescription drug costs, which was somewhat higher than the plans estimated in their bid submissions. However, some of the drugs with the highest Part D rebate amounts will be losing patent protection in the next several years. As a result, rebates are projected to decrease from 10.7 percent in 2010 to 9.7 percent in 2020.”[v]
The Trustees clarify that the reported rebate levels “are average rebate percentages across all prescription drugs. Generic drugs, which represent about 72 percent of all Part D drug use in 2009, typically do not carry manufacturer rebates. Many brand-name prescription drugs carry substantial rebates, often as much as 20-30 percent.”[vi]
Recent Research Shows that Competition among Part D Plans Lowers Drug Spending in the Private Sector
Economists from the University of Southern California and Boston University have found that because Part D resulted in more people being covered by private insurance plans, the plans’ negotiating powers were increased such that “[o]n average, Part D lowered retail prices for commercial insureds by 5.8% to 8.5%. The cost-savings to the commercial market amount to $3 billion per year, which approximates the total annual savings experienced by Part D beneficiaries who previously lacked drug coverage.”[vii]
Average Beneficiary Part D Premiums in 2011 Are 43% below Original Projections
The average monthly beneficiary premium for Part D coverage will be $30 in 2011, far below the $53 forecast originally, and an increase of only $1 over the 2010 average premium of $29. According to CMS Administrator Don Berwick, “[t]hese very modest increases in premiums, along with the new discounts...are going to make medications more affordable to Medicare beneficiaries”[viii] CMS officials report that in 2011, over 99% of Part D enrollees will have access to a plan with a premium that is the same or lower than their 2010 premium.[ix]
Beneficiaries Are Highly Satisfied with Part D
Recently released polls show that Medicare Part D enrollees are overwhelmingly satisfied with their Part D coverage. It shows 84 percent of Part D enrollees are satisfied with their coverage, and 95 percent say their coverage works well. Additionally, vulnerable beneficiaries who are dually eligible for both Medicaid and Medicare exhibited the highest satisfaction.[x]
Senator Schumer should check the facts before he points the finger.
[i] See CBO Medicare baselines for 2005 through 2011 available at www.cbo.gov
[ii] CBO, “Preliminary Analysis of the President’s Budget for 2012,” March 18, 2011, p. 12. http://www.cbo.gov/ftpdocs/121xx/doc12103/2011-03-18-APB-PreliminaryReport.pdf
[iii] See: CMS Office of the Actuary memo, “Release of the 2010 Part D National Average Monthly Bid Amount,” August 13, 2009, CMS Office of the Actuary memo, “Release of the 2011 Part D National Average Monthly Bid Amount,” August 18, 2010. Both memos available at found at http://www.cms.gov/MedicareAdvtgSpecRateStats/RSD/list.asp.
[iv] 2011 Medicare Trustees Report, p. 184.
[v] 2011 Medicare Trustees Report, p. 183.
[vi] 2011 Medicare Trustees Report, p. 183. Footnote 76.
[vii] Lakdawala, D. and Yin, W. “Insurers’ Negotiating Leverage and the External Effects of Medicare Part D” NBER Working Paper 16251. August 2010, www.nber.org/papers/w16251.
[viii] CMS Press Release, “Medicare Prescription Drug Plan Premiums to Increase Slightly Medicare Beneficiaries May Need to Enroll in New Plans,” August 13, 2009.
[ix] MedPage Today, “Medicare Part D Premiums Going Up by $1 in 2011,” Emily P. Walker, August 19, 2010.
[x] [x] KRC Survey for Medicare Today, “Seniors’ Opinions About Medicare Rx: Fifth Year Update” September 2010.
