That's the question the Committee on Oversight and Government Reform will try to answer this Thursday at a 10 am EST hearing in the Rayburn House Office Building in Washington, DC.
As the committee notes, the Medicare Part D program provides prescription drug coverage to almost 30 million enrollees, and will cost federal taxpayers almost $1 trillion in the next decade. Since Part D began in January 2006, there have been questions whether private insurers who run the program are effectively negotiating with drugmakers for low prices. The hearing will examine whether insurers that receive government subsidies to provide the Part D benefit are able to effectively obtain discounts.
Here is the witness list...
Kerry Weems - Acting Administrator, Center for Medicare and Medicaid Services; Steve Schondelmeyer- Dep of Pharmaceutical Care and Health Systems, University of Minnesota; Gerard Anderson - Director, Center for Hospital Finance and Management, Bloomberg School of Public Health, Johns Hopkins University; Fona Scott Morton - economics professor, Yale School of Management, Yale University; Mark Merritt - ceo, Pharmaceutical Care Management Association; Rick Smith, senior vp of policy, PhRMA; Paul Precht, director of policy and communications, Medicare Rights Center
9 Comments
Ed,
Although the difference is somewhat semantic, you state that "the hearing will examine whether insurers that receive government subsidies to provide the Part D benefit are able to effectively obtain discounts." It might be more appropriate to state that the enrollees are receiving a subsidy (they are the ones receving the financial assistance) and not the plans. The plans are receiving premium payments, based on bids. The beneficiary pays roughly 1/4 of the premium, while the federal government subsidizes the remaining 3/4 of the premium. Subsequently, the plans are providing a service (ie, drug coverage).
I'll also point out that this is one of the unusual government programs that has actually come in signficantly under budget since its inception and has very high approval ratings (>80% approval) from beneficiaries.
Atlex
I'm sure it gets very high approval ratings--75% of the cost subsidized? Great!
When will they come out with Part D for lunch? I'm hungry, and I'd love for gov't to buy 3 out of 4 meals for me. It would also make the local restaurants happy.
And without food, I'll die.
James,
I guess you can take your complaints to Congress. As a society, we have determined that we will subsidize health care for the elderly (Medicare) and the poor (Medicaid). There are also subsidies for food, but only for the poor. Maybe one day, they'll add a similar subsidy for the obnoxious.:)
Atlex
Well, Atlex, while my post was made with tongue in cheek, the fact is that, at current rates, the Medicare "trust fund" will run out of money in just 10 years. The cost through 2015 for *just* Part D, just 9 years of the program, are projected to be $724 Billion. That's more than $2,500 for every man, woman and child in America.
In 2002, Medicare spending (prior to D) was "only" ~$250 billion. In 2007, after part D, it is up to $440 billion.
All that extra money goes to the pharmaceutical companies. So I see why you like it.
Oh, and it should be noted that a large reason for Part D coming in under budget each year can be attributed to increased availability and prescribing of generics.
"Society" may have deemed that healthcare for the elderly be subsidized, but it was the Bush Administration and a Republican congress who deemed that pharma companies be subsidized.
James,
I recognized that your original comment was made with tongue planted in cheek. However, your second comment contains a number of misrepresentations. While Part D certainly added to the overall Medicare bill, your statement seems to suggest that the Medicare growth from 2002 to 2007 is due to Part D. This is not the case. According the CBO, 8% (~$30B) of the $374B in benefit payments in Medicare in 2006 were associated with Part D. Your second misstatement is that all of this went to pharma companies. If you read analyst reports, you'll probably notice that most analysts view Part D as a neutral financial event for the brand pharmaceutical industry--some increased demand, but also increased rebates. The major beneficiaries has been Part D plans/PBMs, generic drug manufacturers, and, perhaps, retail pharmacy. Third, Part D has nothing to do with the Medicare trust fund. It has a completely different funding stream. Finally, your figure of $2500 per person as the cost of the program. Of course, that number is not per year but over 9 years. $277 per person sounds a lot more reasonable. Finally, this is no subsidy for anyone but seniors. Plans, pharmacies, and pharma all are receiving a negotiated fee (or bid price) for services or products supplied.
Atlex
The debate about discounts/rebates contributes little to the real issue of Part D's "solvency", for lack of a better term. Atlex is correct--the impact on big pharma is perhaps a 1-2% increase in revenues. Other posters are correct in pointing out the increased use of generic alternatives.
The long-term issue is how many beneficiaries enroll in Part D. At present, employers receive incentives to continue providing actuarially-equivalent Rx benefits. As fewer employers offer retiree benefits, more will move into Part D, and problems will occur since this is basically an uncapped benefit.
Bob,
While theoretically, you are directionally correct, most large employers are already receiving subsidies (part of the MMA) to support the pharmaceutical benefit of retirees. Thus, even if their retirees shift to Part D, the impact is much more modest than the initial group of enrollees. In addition, a significant number of retirees with employer-based drug coverage are retirees from government jobs. It is unlikely that government retirees will move into Part any time soon. Thus, the risk the you outline is more of a longterm risk rather than a short term one. I'm not saying that there won't be financial issues with Part D, but there are far more serious Medicare problems to be concerned about--ie, Medicare Parts A and B.
Atlex
Atlex,
A little off-beat here!! NJ Children in Foster Care 39,000 respectfully.. 39,517 received psychotropic medication!! Is every Child in NJ's Custody Mentally Ill? Do you have an explanation as to why we drug our most vulnerable population. I will assume that you plan to ignore this post.
Atlex, yes, employers receive rather generous incentives to keep their Rx retiree benefits. Remember; however, that that the earliest boomers are now retiring the the numbers will accelerate. To your point, Part A is the real concern.
I agree with others that in the future only government employees will have retiree benefits. The private sector will get out of this area as soon as practicable.
I don't believe that Part D is sustainable in its present form. Rather than focusing on rebates, a more effective short-term solution is to reduce the number of therapeutic categories dramatically. Then you can get more signficant rebates.
D is structured in the same manner as Parts A, B and C were: generous subsidies at the beginning to be followed by major constraints after a few years.