Medicare Part D Success in Jeopardy

Sen. Lamar Alexander, R-Tenn., left, chairman of the Senate Health, Education, Labor, and Pensions Committee, greets Secretary of Health and Human Services Alex Azar the witness at a hearing on prescription drug prices, on Capitol Hill in Washington, Tuesday, June 12, 2018. (AP Photo/J. Scott Applewhite)

At a summit celebrating the 15th anniversary of Medicare Part D last week, former President George W. Bush reflected on the historic program, which today supports more than 43 million Americans.

President Bush explained the motivation and success of the program, telling the audience, “Adding a drug benefit to Medicare based on competitive principles was one of my Administration’s signature achievements.”

President Bush hit the nail on the head when he underscored the program’s “competitive principles,” as the market-based structure of Medicare Part D is why the program cost 45 percent less than originally projected and why premiums have increased at far lower rates than private plans or other government programs.

In short, competition works, and Medicare Part D demonstrates that free market forces benefit consumers and patients by creating incentives for all parties to provide superior services at the lowest cost possible.

However, Congress changed the program in a discrete but impactful way in this year’s Bipartisan Budget Agreement (“BBA”), undermining the competitive structure that President Bush worked to implement and threatening the success of the program.

Congress closed what’s known as the “donut hole” early. The donut hole is a phase of the program where patients are responsible for a larger portion of the cost of their prescriptions, and insurers and pharmaceutical manufacturers share the cost for the remaining portion.


To be clear, the government has planned to close the donut hole, as it is uniquely punitive to force patients, who are often the sickest and elderly, to pay for their prescriptions with no assistance.

In closing the donut hole, Congress altered the cost-sharing structure between pharmaceutical manufacturers and insurers so that starting in 2019, insurers will have no real liability for this coverage.

This may seem to be a small and insignificant policy change, as patients will see no change in how their costs are handled. But the previous cost-sharing structure was devised to help keep costs low, as insurers were incentivized to negotiate for lower prices and to help manage care to ensure that patients remained out of the coverage gap. By eliminating this liability, insurers are actually incentivized to allow prices to increase, so that patients reach their plans’ coverage limits faster.

The change flies in the face of Medicare Part D’s founding principles.

Congress can and should keep the donut hole closed as always intended. America’s seniors should not be penalized for getting sick. But Congress must restore the competitive cost-sharing arrangement first envisioned by President Bush and the program’s architects.

New analysis of a revised CBO score shows that the new arrangement is out of balance and will increase the cost of the program for taxpayers and enrollees.

I’ve warned about this change and its potentially wasteful effects before – but so far Congress has failed to act and fix their mistake.


Voters have identified healthcare as a major priority this year – with some polls identifying it as the number one issue for voters – and they’re looking for action.

Patients continue to face higher cost-sharing, premiums and deductibles in their plans while insurers and other actors increase their profits while taking billions in federal subsidies and risk-adjustment payments.

When we have a program, such as Medicare Part D, which has proven to control costs and leverage competition between these actors, why would Congress undermine it?

While we may not have an answer to that question, we do have an answer for what they can do. Congress can fix the changes they made to Medicare Part D and find the right balance for it’s cost-sharing.

As President Bush said last week, “Medicare Part D continues to play an important role for millions of Americans who rely on it to get medications they need at an affordable cost.”

We are still looking to Congress to ensure that remains the case.


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