Medicare Part D
Medicare Part D, also called the Medicare prescription drug benefit, is an optional United States federal-government program to help Medicare beneficiaries pay for self-administered prescription drugs.[1] Part D was enacted as part of the Medicare Modernization Act of 2003 and went into effect on January 1, 2006. Under the program, drug benefits are provided by private insurance plans that receive premiums from both enrollees and the government. Part D plans typically pay most of the cost for prescriptions filled by their enrollees.[2] However, plans are later reimbursed for much of this cost through rebates paid by manufacturers and pharmacies.[3]
Part D enrollees cover a portion of their own drug expenses by paying cost-sharing. The amount of cost-sharing an enrollee pays depends on the retail cost of the filled drug, the rules of their plan, and whether they are eligible for additional Federal income-based subsidies. Prior to 2010, enrollees were required to pay 100% of their retail drug costs during the coverage gap phase, commonly referred to as the "doughnut hole.” Subsequent legislation, including the Affordable Care Act, “closed” the doughnut hole from the perspective of beneficiaries, largely through the creation of a manufacturer discount program.[4]
In 2019, about three-quarters of Medicare enrollees obtained drug coverage through Part D.[5] Program expenditures were $102 billion, which accounted for 12% of Medicare spending.[6] Through the Part D program, Medicare finances more than one-third of retail prescription drug spending in the United States.[7]
Program specifics[edit]
Eligibility and enrollment[edit]
To enroll in Part D, Medicare beneficiaries must also be enrolled in either Part A or Part B. Beneficiaries can participate in Part D through a stand-alone prescription drug plan or through a Medicare Advantage plan that includes prescription drug benefits.[8] Beneficiaries can enroll directly through the plan's sponsor or through an intermediary. Medicare beneficiaries who delay enrollment into Part D may be required to pay a late-enrollment penalty.[9] In 2019, 47 million beneficiaries were enrolled in Part D, which represents three-quarters of Medicare beneficiaries.[5]
Plans offered[edit]
Part D benefits are provided through private plans approved by the federal government. The number of offered plans varies geographically, but a typical enrollee will have dozens of options to choose from.[10] Although plans are restricted by numerous program requirements, plans vary in many ways. Among other factors, enrollees often compare premiums, covered drugs, and cost-sharing policies when selecting a plan.
Medicare offers an interactive online tool [11] that allows for comparison of coverage and costs for all plans in a geographic area. The tool lets users input their own list of medications and then calculates personalized projections of the enrollee's annual costs under each plan option. Plans are required to submit biweekly data updates that Medicare uses to keep this tool updated throughout the year.
Program costs[edit]
In 2019, total drug spending for Medicare Part D beneficiaries was about 180 billion dollars.[43] One-third of this amount, about 120 billion dollars, was paid by prescription drug plans. This plan liability amount was partially offset by about 50 billion dollars in discounts, mostly in the form of manufacturer and pharmacy rebates.[16] This implied a net plan liability (i.e. net of discounts) of roughly 70 billion dollars. To finance this cost, plans received roughly 50 billion in federal reinsurance subsidies, 10 billion in federal direct subsidies, and 10 billion in enrollee premiums.[23]
In addition to the 60 billion dollars paid in federal insurance subsidies, the federal government also paid about 30 billion dollars in cost-sharing subsidies for low-income enrollees.[23] The federal government also collected roughly 20 billion in offsetting receipts. These offsets included both state payments made on behalf of Medicare beneficiaries who also qualify for full Medicaid benefits and additional premiums paid by high-income enrollees. After accounting for these offsets, the net federal cost of Part D was about 70 billion dollars.[44]
Impact on beneficiaries[edit]
A 2008 study found that the percentage of Medicare beneficiaries who reported forgoing medications due to cost dropped with Part D, from 15.2% in 2004 and 14.1% in 2005 to 11.5% in 2006. The percentage who reported skipping other basic necessities to pay for drugs also dropped, from 10.6% in 2004 and 11.1% in 2005 to 7.6% in 2006. The very sickest beneficiaries reported no reduction, but fewer reported forgoing other necessities to pay for medicine.[46][47]
A parallel study found that Part D beneficiaries skip doses or switch to cheaper drugs and that many do not understand the program.[46] Another study found that Part D resulted in modest increases in average drug utilization and decreases in average out-of-pocket expenditures.[48] Further studies by the same group of researchers found that the net impact among beneficiaries was a decrease in the use of generic drugs.[49]
A further study concludes that although a substantial reduction in out-of-pocket costs and a moderate increase in utilization among Medicare beneficiaries during the first year after Part D, there was no evidence of improvement in emergency department use, hospitalizations, or preference-based health utility for those eligible for Part D during its first year of implementation.[50] It was also found that there were no significant changes in trends in the dual eligibles' out-of-pocket expenditures, total monthly expenditures, pill-days, or total number of prescriptions due to Part D.[51]
A 2020 study found that Medicare Part D led to a sharp reduction in the number of people over the age of 65 who worked full-time. The authors say that this is evidence that before the change, people avoided retiring in order to maintain employer-based health insurance.[52][53]
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