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When Medicare began to provide coverage for prescription drugs almost 10 years ago, under Part D, millions of people who previously had no drug coverage were able to access needed medications.  By any measure, the drug benefit has helped many people. While drug coverage was a key missing ingredient in Medicare coverage until then, the way drug coverage is provided in Medicare raises ongoing concerns, particularly as some would view it as a model for other Medicare coverage and delivery systems. 

The Part D prescription drug benefit is only available through private, commercial plans – stand-alone prescription drug plans (PDPs) and Medicare Advantage plans that offer the Part D drug benefit (MA-PDs).  Proponents of this market-based approach argue that competition has kept overall Part D costs well below initial cost estimates.  Other analysts, however, note that cost are lower largely due to factors other than its market-based structure, including the widespread increase in use of generic drugs over brand-name drugs, a number of blockbuster drugs coming off patent (meaning that cheaper, generic equivalents usually became available) and fewer than expected people enrolled in Part D plans. 

This private commercial structure requires Medicare beneficiaries to navigate among an average of 30 plan choices, most with 5 different tiers of cost-sharing, with varying formularies and utilization management rules (tools used to restrict or steer access to certain drugs).  Along with a complicated private-only plan design that has led to significant beneficiary confusion and less than optimal selection by many enrollees, the federal legislation that created Part D also prohibited the Medicare program from negotiating prices with drug manufacturers, and moved individuals dually eligible for Medicare and Medicaid into the new drug benefit. Among other things, this means that drug manufacturers no longer have to provide rebates for the cost of drugs for these individuals as is required in the Medicaid program.  With new “breakthrough” drugs entering the market (like last year’s effective but high-priced Hepatitis C drugs), will this piecemeal, market-based Part D program be able to adequately control costs in the future?  Is there a more consumer-friendly, cost-friendly way to provide a drug benefit to Medicare beneficiaries, such as allowing the Medicare program itself, rather than a private plan, to offer the drug benefit?

A recent briefing in Washington hosted by the National Academy of Social Insurance asked the question, “Medicare Part D — A Beacon or a Warning Light for the Future?” The hazard lights on the Part D bus are flashing, it's time to look under the hood.

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