MEDICARE PART D
September 2011
OUTLINE
• Introduction: Overview of Medicare and Medicare Part D
• Part D Is a Successful Program
• Deficit Reduction and Medicare Part D
• Government Price Controls:
– Could Undermine Part D’s Success
– Are Not the Right Way to Grow the Economy
– Risk Raising Costs and/or Hindering Access for Seniors
– Could Slow or Stop Development of New Medicines
INTRODUCTION: MEDICARE OVERVIEW
• Part A (1966): Inpatient hospital and post-acute care.
• Part B (1966): Physician, outpatient hospital, drugs that are not
self-administered.
• Part C (1984): Part A and Part B services provided by a health
plan, now called Medicare Advantage.
• Part D (2006): Outpatient prescription drugs
INTRODUCTION: HOW MEDICARE PART D WORKS
• Part D is unique in Medicare because it is based on competition,
not government-set prices.
• Part D plans compete to deliver affordable coverage for
beneficiaries and value for taxpayers.
• Enrollees choose the plan with the coverage and costs that meet
their needs.
• Extra help is available for enrollees of limited means.
• Government sets standards and oversees competition.
PART D EXPANDED SENIORS’ ACCESS TO
MEDICINES
Medicare Beneficiaries
In 2011, 90% of people with Medicare have comprehensive drug coverage.
50
45
40
35
30
25
20
15
10
5
0
42M
(90%)
24M
(59%)
2005
Has Comprehensive Drug Coverage
2011
No Comprehensive Drug Coverage
Source: The Lewin Group, September 2006; and CMS, Medicare Advantage, Cost, PACE, Demo, and Prescription Drug Plan Contract Report - Monthly Summary Report (Jan. 2011).
SENIORS LIKE PART D
Steady high satisfaction rate
“Overall, how satisfied are you with your prescription drug coverage?”
84%
78%
36%
28%
Very
Satisfied
53%
50%
Somewhat
Satisfied
March 2006
September 2010
Source: KRC Research Surveys conducted for the Medicare Rx Education Network and Medicare Today.
SENIORS ARE SAVING MONEY WITH PART D
Average Part D beneficiary premium in 2012 will be $30 – 44%
below original projection
Average Monthly Part D Beneficiary Premium, 2006-2012
$60
$56
$50
$40
$47
Original Projection
$37
$28
$30
$30
Actual
$23
$20
$10
$0
2006
2009
2012
Source: All original projection estimates are taken from 2004 Medicare Trustees Report, p. 164 and rounded to the nearest dollar. Actual average premium figures for 2006, is taken
from 2008 Medicare Trustees Report, p. 180; 2009 average premium taken from CMS Press Release, “Lower Medicare Part D Costs than Expected in 2009”, August 14, 2008;
Average premium for 2012 is taken from CMS Press Release, “Medicare prescription drug premiums will not increase, more seniors receiving free preventive care, discounts in the
donut hole” August 4, 2011.
PART D’s COST IS FAR BELOW PROJECTION
Projected total cost of Part D has dropped 41%
CBO Projections and Tallies of Total Part D Spending for 2004-2013, in Billions
$322.2 Billion Less
Source: PhRMA analyses of data from CBO Medicare Part D Baselines for 2004-2011.
PART D HELPS AVOID COSTLY HOSPITAL AND
NURSING HOME CARE
Harvard researchers writing in the Journal of the American Medical
Association report1:
•
Part D is associated with reduced nondrug medical spending for
beneficiaries with limited prior Rx coverage.
•
Part D saves Medicare about $1,200 per year in hospital, nursing
home and other costs for each senior who previously lacked Rx
coverage.
1 J.M.
McWilliams, “Implementation of Medicare Part D and Nondrug Medical Spending for Elderly Adults with Limited Prior Drug Coverage,” Journal of the American Medical
Association, 306 (27 July 2011): 4, 402-409.
DEFICIT REDUCTION AND MEDICARE PART D
•
Recent policy changes proposed by some members of
Congress and the Administration would impose government
price controls in Part D.
•
This would require manufacturers to pay tens of billions of
dollars in rebates to the government – in addition to the savings
the program already provides to seniors and the rebates already
being paid to Part D plans.
THESE PROPOSED CHANGES TO PART D
SHOULD BE OPPOSED BECAUSE:
1. The changes would undermine Part D’s success.
2. Government price controls are not the right way to grow the
economy.
3. Economists agree that introducing Medicaid-style rebates into Part
D risks raising costs and/or tightening access for seniors.
4. Imposing government rebates on Part D could slow research on
diseases disproportionately affecting Medicare beneficiaries.
Employees contacting Members of Congress about Part D is
essential to sustaining this successful program and our
industry’s capacity to fully contribute to better health and a
stronger economy.
GOVERNMENT PRICE CONTROLS ARE NOT THE
RIGHT WAY TO GROW THE ECONOMY
•
Battelle Institute estimates that a $10 to $20 billion per year
reduction in sector revenue – the same magnitude as policies
recently proposed by the Administration and some in Congress –
would result in 130,000 to 260,000 lost jobs.
•
The sector supported a total of 4 million U.S. jobs in 2009,
including 674,192 direct jobs.
•
In 2009, each job in a biopharmaceutical research company
supported almost 5 additional jobs in other sectors.
Source: Battelle Technology Partnership Practice, The U.S. Biopharmaceuticals Sector: Economic Contribution to the Nation, July 2011,
http://www.phrma.org/sites/default/files/159/2011_battelle_report_on_economic_impact.pdf
3. MEDICARE PART D HAS AVOIDED THE TYPE
ECONOMISTS
FIND THAT GOVERNMENT
OF GOVERNMENT-IMPOSED
ACCESSPRICE
CONTROLS
IN PART COMMON
D RISK INCREASING
COSTS
RESTRICTIONS
IN MEDICAID.
FOR SENIORS AND OTHER CONSUMERS
•
Beneficiary choice among plans and the availability of a range of
affordable options are key components of Part D, promoting both
medicines. A Lewin
Group
studyDirector
found that in
• affordability
Analysis and
by aaccess
formertoCongressional
Budget
Office
2011
the Partbeneficiary
D plans withpremiums
the highestinand
second
highest
enrollment
indicates
Part
D would
increase
by 201
40 percent.
covered
99 percent
and 94 percent, respectively, of the top drugs most
often prescribed to those 65 or older.
•
•
According to the former Chief Actuary of Medicare, “if this
policy is adopted,
patients
bear
the cost…”
All[rebate]
Part D enrollees
may change
plans will
on an
annual
basis inwith
order to
“tighter formularies
and
less access
totheir
newer
orand
more
expensive
maintain prescription
drug
coverage
that
fits
cost
coverage
needs,
2
drugs.”
and those who are dually eligible may change plans at any time, unlike
Medicaid where enrollees are typically restricted to the state’s preferred
drug list (PDL).
1. July 21, 2011, “Cost Shifting Debt Reduction to America’s Seniors: Medicare Part D Rebates Would Dramatically Increase Drug Premiums”, Douglas Holtz-Eakin and Michael
1. Lewin Group
analysis
for PhRMA, “2010 Comparison of VA National Formulary and Formularies of the Highest Enrollment Plans in Medicare Part D and the Federal Employee Health
Ramlet
http://americanactionforum.org/sites/default/files/AAF_Part%20D%20Financial%20Impact%202%20.pdf
Benefit
March
16, 2010.
2. Program”
Guy King
and Joe
Antos, “Tampering with Part D Will Not Solve Our Debt Crisis.” AEI Health Studies Working Paper 2011-03, June 29, 2011 http://www.aei.org/paper/100234
2. Beneficiaries who qualify for the low-income subsidy may change throughout the year.
IMPOSING GOVERNMENT PRICE CONTROLS ON
PART D COULD HARM CAPACITY TO DEVELOP
NEW MEDICINES
•
CBO: Imposing price controls in Part D could “reduce the amount of funds
that manufacturers invest in research and development of new products.”1
•
Department of Commerce: Foreign government price control strategies
“tend to have the most significant impact on the newest and most
innovative medicines…”2
•
Reducing investment in research could slow medical progress in
Alzheimer’s and other conditions where patients have urgent needs and
where costs will skyrocket without new treatments.
1. CBO , “Reducing the Deficit: Spending and Revenue Options” March 10, 2011, p. 54. http://www.cbo.gov/doc.cfm?index=12085
2. “Pharmaceutical Price Controls in OECD Countries, Implications for U.S. Consumers, Pricing, Research, and Development, and Innovation” U.S. Department of Commerce,
REVIEW: MANDATORY REBATES IN PART D
SHOULD BE OPPOSED BECAUSE:
1. Government price controls would disrupt a highly successful
program.
2. Price controls are not the right way to grow the economy.
3. Introducing Medicaid-style rebates into Part D could raise costs
and limit access for seniors.
4. Imposing Medicaid rebates on Part D could slow research on
diseases disproportionately affecting Medicare beneficiaries.
DISCUSSION