A new effort by the Obama Administration to change the Medicare Part D prescription drug program by imposing new rules on how the plans are set up and managed risk undermining what has been one the government’s few health care success stories. The proposed rules from the Centers for Medicare and Medicaid Services (CMS) would hinder the ability of Medicare beneficiaries to choose the kind of private plan that works best for them and limit access to the drugs they need. The proposed rules would limit the number of Part D plans that can be offered in a particular region, weaken the current guarantee that certain classes of medications must be fully available to patients with serious illnesses and places limits of health plans to negotiation with pharmacies to reduce drug costs.
The key to Medicare Part D is competition. Under the Part D model, private insurance plans compete against each other for the business of senior Medicare recipients, offering different benefits, costs and levels of coverage. The program empowers seniors to choose which plan works best for them and the government subsidizes the premiums. This competition leads to lower prices for seniors. Negotiation between the plan providers and pharmacies also reduces prescription costs.
The rules have drawn sharp criticism from consumer and free-market groups. In late February, a coalition of 283 organizations representing patients, seniors, employers disabled Americans sent a letter to CMS Administrator Marilyn Tavenner calling for the withdrawal of the new regulations that would undermine the many successes of Part D while having “unintended consequences for seniors and beneficiaries with disabilities.”
The Healthcare Leadership Council outlined several major problems with the proposed rules that were presented in the coalition letter:
The regulations would limit the number of Part D plans that could be offered to beneficiaries. “Millions of seniors and beneficiaries with disabilities would lose their current plan of choice or face changes in coverage,” they wrote.
Despite the clear intent of Congress that Medicare Part D should rely solely upon market-based pricing and private sector competition, the rules would “dramatically expand the federal government’s role in Medicare Part D despite the fact that there is no compelling reason for doing so. Reshaping Part D in this way will neither improve quality and affordability, nor incentivize plan innovation,” the letter said.
New cost burdens imposed as a result of the proposed regulations “will drive higher premiums for millions of beneficiaries and lead to higher costs for Medicare without tangible gains in service or quality for beneficiaries.”
CMS’ proposal would have a dramatic effect on the number of plans available for seniors. A study by Avalere Health found that the rule change limiting the number of prescription drug plans (PDPs) per region could end up forcing 39 percent of all enhanced plans to be eliminated in 2016. The Avalere study also estimated that the regional limit, which holds standalone PDP sponsors to one basic and one enhanced plan per region would require “214 of the current 552 enhanced PDPs to be terminated or consolidated with an existing plan.”
The new rules would also dramatically increase the cost of the program. The National Taxpayers Union points to a study from the Milliman actuarial firm that concluded that the cost of Medicare Part D would increase by an additional $1.6 billion per year if the rules are adopted.
Testifying before the House Subcommittee on Health, Douglas Holtz-Eakin, the President of the American Action Forum argued that reforming Medicare Part D and limiting competition violates the intent of the Medicare Modernization Act and will increase cost and decrease drug access for seniors.
From Holtz-Eakin’s testimony:
- The Medicare Part D program is a proven success story of bipartisan Medicare reform, making affordable prescription drug coverage available to seniors and the disabled;
- The proposed new rule titled “Medicare Program; Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs” clearly violates the intent of Congress when it passed the Medicare Modernization Act (MMA) and rests on a questionable legal foundation by interfering with the established negotiation processes;
- Policy analyses show the proposed rule is likely to raise costs for seniors, programs, and the federal taxpayers, unnecessarily harming the superb record that the competition-based design of Part D has built; and
- The rule imposes requirements that will decrease seniors’ access to vital prescription drugs.
Medicare Part D is not broken. Part D has proven that a modern, free-market model can replace a system of price controls and provide medications to the neediest of Americans, all at a lower cost than the old system. Instead of foisting unnecessary changes on an already successful program, legislators should be using the successful free market mechanisms at the heart of Part D as a model for other bidding processes within Medicare.