Do Medicare Prescription Drug Plans (Part D) Really Save Medicare Money?

Posted by National Health Index Medicare News Tuesday, May 29th, 2012

Medicarenewsgroup.com: by John F. Wasik/The Medicare NewsGroup, May 29, 2012 10:00.

As Medicare searches far and wide for ways to reduce costs, there’s the perennial question: Is the Medicare Prescription Drug Plans (Part D) program saving money or needlessly running up costs?

Based on some superficial evidence, Part D seems to be a cost saver. But if you poke beneath the surface, the savings are less clear-cut and deserve more examination. A recent study by Georgetown Professor Jack Hoadley for the Kaiser Family Foundation asks some questions that Medicare needs to explore further.

Part D was one of the first hybrid offerings introduced into Medicare as part of the Medicare Modernization Act of 2003. Along with Medicare Advantage Plans (Part C), the idea behind these subprograms was to introduce private competition within Medicare’s fee-for-service (FFS) structure and bring costs down. Part D, which was started six years ago, expanded Medicare benefits to include prescription medications. For-profit companies, which received subsidies for participating in the plan, offered drugs at discounts.

Around the time of Part D’s inception, the Congressional Budget Office (CBO) made some estimates as to how much the program would cost. The CBO numbers would provide a future baseline to determine whether the drug program — through the private competitive model — would save Medicare money. Read More