“The Part D Medicare drug program is popular, and the amount of seniors without drug coverage has fallen 60 percent since the Medicare Modernization Act (MMA) was passed in 2003,” says report author and NCPA Senior Fellow Devon M. Herrick. “Seniors have a wide range of plans from which to choose, and drug spending has actually been much lower than projected. Costs per capita in 2013 were projected to be $3,047 but were actually only $1,846, a savings of 40 percent per enrollee.”
Of the 39 million Americans enrolled in Medicare, 36 million of them have Medicare Part D drug plans. Of these, 14 million are enrolled in popular plans that offer seniors lower premiums (and lower costs) in return for patronizing a preferred pharmacy network.
Part D plans aim to keep costs down by using preferred-drug lists, tiered formularies and mail-order drug suppliers.
Drug plan operators negotiate with drug companies and distributors to get the lowest possible drug prices, entering into exclusive contracts with preferred pharmacy networks.
But last month, CMS proposed regulations that would inhibit the ability of drug plans to offer lower drug prices. The proposed rules would weaken the ability of drug plans to bargain for lower prices by banning “preferred networks.”
The actuarial firm Milliman contends that the CMS-proposed ban would cost the Medicare program almost $1 billion annually, adding more than $9 billion to the cost of the program over the next decade.
“The proposed rule is a bad idea, and if it goes through, seniors will pay higher prices for these Part D medications,” said Herrick.
Fiscal conservatives such as the Heritage Foundation criticized the MMA as a “Medicare drug entitlement” when it was enacted as a not-paid-for program adding an estimated $8 trillion to the program’s long-term unfunded liabilities when President George W. Bush signed it into law in 2003.
However, since it was a Republican Party proposal, supported and lobbied into federal law by the major pharmaceutical companies, no grassroots opposition movement erupted against it as occurred several years later over the enactment of the Patient Protection and Affordable Care Act (aka “Obamacare”).
The lesson here is that both D.C. parties are going to spend based on which lobbies support them and also that no third parties are allowed at the federal level.
One good thing about the so-called “entitlement” spending, though, is that it goes to Americans, who mostly spend this money in this country as opposed to the similarly “unfunded” trillions in spending on never-ending wars and military occupations all over the world.