As a practicing physician, I have a love-hate relationship with Medicare Part D (the drug benefit). On the one hand, I feel a lot better taking care of folks who are on life-saving medication as opposed to problem solving with a combination of gimmicks (sample closets and discount programs) and compromise (if you don’t eat, you can afford to take this medicine which will buy you six months of extended life on average). The trade-off was that the pharmaceutical companies got a much larger payout than they should have, and Wal-Mart was about a year too late with their $4 plan, which would have been a much more effective way to purchase medications for Medicare recipients.

As I listen to the ongoing Medicare debate (and yell “The Affordable Care Act IS the Democrats’ plan!” at NPR) I am troubled by the statements that Medicare Part D should become the standard bearer for “competition” in health care delivery because it came in under projected budget. The meme is that the various national plans have worked to lower costs by creating educated consumers who have selected efficient, effective commercial plans  from among those available. I have found at least one explanation for my disbelief in that theory in a post by Edward Park at the Center on Budget and Policy Priority.

He points out that the reasons for this program coming in under budget are:

1) Drug costs are down due to a reduction in the new drug “output.” Turns out the pump was primed prior to 2004 with a lot of drugs to treat diseases for which there was previously no adequate treatment. These drugs accounted for a lot of the cost inflation early in the program, but now they have been released as generics. Folks aren’t using less medications, just more generics.Granted, this might be the market and more specifically the fear of the “doughnut hole,” but not a result of Health Springs vs United.

2) Lower than expected enrollment in the program. Turns out that the cheapest program is one that fewer people use than anticipated. It was thought that 96% of recipients would enroll. The actual number is 76%. There are actually a fair number of recipients who seem to only need the occasional Tylenol. Perhaps that’ll change with marketing.

In addition

there is evidence that, far from reducing costs, the use of private plans to deliver the Medicare drug benefit has increased costs.  Prior to the creation of Medicare Part D, Medicaid provided prescription drug coverage to “dual eligibles” — the low-income beneficiaries enrolled in both Medicare and Medicaid.  Then, starting in 2006, Medicare took over drug coverage for the dual eligibles.  When Congress enacted the Medicare drug benefit, it assumed that the private insurance companies that would participate in Medicare Part D would be able to negotiate larger discounts from drug manufacturers than those required under Medicaid.  In fact, however, research shows that the private insurers offering Part D coverage are getting significantly smaller discounts for drugs than the rebates that manufacturers are required to provide state Medicaid programs. One estimate found that drug prices, net of discounts, under Part D to be at least 20 percent higher than the estimated net prices that Medicaid pays.

Turns out, this is a very complex system.

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