Medicare Part D – It Continues to be a Huge Success

Medicare’s prescription drug program, labeled Part D, has been one of the most successful government programs ever implemented. After Medicare began in 1965 there were changes along the way (see last week’s blog). One of the things that was discussed then was a prescription drug program, but Congress didn’t get serious until 2003 when it finally became law. It wasn’t easy to get this new benefit passed. I think it might be helpful to look back at how it finally became law.

It happened to be around when the discussions were going on about how this new program should work. Some wanted the government to be the single payer and control all aspects of the program. Others, (like me) wanted it to be a public/private partnership where prescription insurance plans could compete for the Part D business. The single payer people warned that there wouldn’t be enough plans offered to give the Medicare beneficiaries sufficient choices, especially in rural areas. They also were fearful that the premiums would spiral up. I have to say that there certainly wasn’t a real consensus on how this new program should operate. The final vote in the House was concluded at 6:00 AM after the voting period was extended for three hours. There was some ferocious lobbying on the floor, but the public/private partnership was approved - 220 to 215. It went on to pass the Senate and was signed into law on December 8, 2003, by President George W. Bush. Everyone was very interested in how this partnership would work when it was fully implemented in 2006.

In the first year of full implementation hospital visits dropped 8%. Consistently over the years Part D premiums have been 40% of the amount estimated when the bill passed. Today, in Billings, Montana there are 16 different Part D plans to choose from. I detail all this to give you the basis for my declaration that Part D was one of the most successful government programs ever implemented. The partnership worked! What other government programs that you know of have come in more than 50% below projections and saved money in another program the first year. It wasn’t without flaws; there were people who were bankrupted by their prescription drug costs. I started lobbying hard for a yearly cap on out-of-pocket costs for drugs in 2009 . . . the $2,000 a year cap finally begins this year. You’re probably tired of me talking about the Part D price fixing part of the Inflation Reduction Act (IRA) and its impact on innovation. My question has always been why does the government think that they need to change the balance between private plans and the government oversight that has worked for almost 20 years? This partnership has enabled the United States to be the world leader in the discovery and development of new life altering and lifesaving medicines. If I’ve said it once I’ve said it a hundred times, “if it ain’t broke, don’t fix it”. Why would we do anything that would slow down the discovery of new medicines that could have a huge impact on our lives and the lives of our kids and grandkids.

The president is now going even further by issuing an Executive Order (EO) concerning the difference in prices for certain drugs here and in other countries. He has said the U.S. has been subsidizing global innovation, that other countries were not paying their fair share of the research and development costs of bringing a new medicine to market, which many estimate to cost more than $1 billion. The president recently sent letters to major drug manufacturers telling them they need to come up with ways to solve the inconsistency between what we pay and what other countries pay for certain drugs. I’m afraid that this is just another foray into a short-sighted, ill-conceived attempt to gain political favor rather than to solve the real problem. I do think that other countries are “freeloading” but using EOs to circumvent the checks and balances of the legislative and judicial branches of our government is not a long range, enduring solution. There has got to be another way.

What we don’t want to do is interrupt the well-established mechanism we have to discover new drugs – like the vaccine to combat COVID-19, which was developed in months rather than years and saved millions of lives. The U.S. is the leader in prescription drug innovation because we allow small companies to attract investors when they have a promising scientific discovery. Before they can get a drug approved by the FDA, they must secure backing from investors willing to take a risk—roughly a one-in-ten chance—that their discovery will successfully navigate clinical trials, reach manufacturing, and ultimately gain placement on insurance and Medicare formularies.

Every year since almost the beginning of Part D we have conducted a survey asking seniors how they feel about the Medicare prescription drug program. We are doing it again this month. I’ll be reporting in a later blog on its results. Year after year, seniors have reported a close to 90% satisfaction rate with Part D and I don’t expect it to change. Again, what other government program has this high of a satisfaction rate? As you may deduce, I’m a fan of Medicare Part D and I want it to continue to help us live better and longer lives. Short-term, knee-jerk reactions are not what we need. We need to get together and come up with long-term solutions.

Best, Thair