Can Medicare Save Money for Beneficiaries and
Drug program offers some sizable opportunities for
the program and senior citizens to save
Ron Pollack, Executive Director, Families USA
May 28, 2013 - Since Medicare Part D went into
effect in 2006, prescription drugs have been an integral part of the
Medicare benefit package. So, the question of how seniors can save
additional money on medications often comes up, but so does the question
of how the entire Medicare Part D program can be more cost-effective and
save taxpayers money without jeopardizing enrollee benefits.
Q: Will closing the Part D “doughnut hole”
really save beneficiaries money?
A: Many seniors may not be aware that the infamous
“doughnut hole,” or gap in coverage, is closing thanks to the Affordable
Before the health care law was passed, if
beneficiaries reached the initial limit on total drug expenses ($2,970
in 2013), they had no prescription drug coverage until they spent an
added $3,700 out of their own pockets.
But in 2013, people in the doughnut hole are
receiving discounts of 52.5 percent on name-brand drugs and 21 percent
on generics. These discounts will result in significant savings for
about 4 million Medicare beneficiaries in 2013. More importantly, the
discounts will continue every year until 2020, when the doughnut hole
will be completely eliminated.
Q: Where can we find more value for Medicare
A: The best opportunity for finding smart savings
in Medicare is looking for better deals on what Medicare pays for
Plans that offer coverage under Medicare Part D are
run by private insurers, and Medicare is prohibited from negotiating
directly for discounts. An independent 2011 study by the Department of
Health and Human Services’ Inspector General found that drug
manufacturers provide an average 19 percent discount to Medicare Part D
plans, while state Medicaid programs receive a discount of 45 percent
for the same drugs. This is a substantial savings that could be passed
on to beneficiaries if Medicare was allowed to negotiate prices like
Q: In what ways can Medicare get a better
bargain on prescription drugs?
A: Substantial savings could come from obtaining
discounts on drugs used by low-income beneficiaries. In fact, before
Medicare Part D was enacted in 2003, drug manufacturers were required to
provide discounts to low-income beneficiaries. Legislation that has been
introduced both in the U.S. Senate and the U.S. House of
Representatives, and the President’s budget proposal, all call for these
discounts to be restored. Estimates show that these discounts could save
the Medicare program anywhere from $120 to $140 billion over the next 10
The savings from these discounts could be used to
improve other aspects of Medicare, or to reduce the deficit.
Q: Would higher discounts in Part D affect the
pharmaceutical industry’s research and development work?
A: Research and development actually thrived at the
same time many of these deeper discounts were in place in the 1990s and
Q: Are there other ways for Medicare to save
money on prescription drugs?
Other options for lowering the cost of the Part D
program include allowing Medicare to negotiate directly with
pharmaceutical manufacturers (like the Department of Veterans Affairs
does), and letting Medicare operate its own Part D plan alongside
private insurers. These alternatives are more complicated than the
discounts discussed above, but they are worth considering in the future.
Q: Why do we need to search for savings in Part
A: In today’s economy, leaders in Washington have
tough choices to make about health care spending. It is true that Part D
costs less than initially forecast, but that is because enrollment is
about 25 percent lower than originally projected, and because increased
use of generics has slowed drug spending overall. These developments
should not prevent us from looking for better value for taxpayer
Families USA is a national organization for
health care consumers - advocate for universal, affordable, quality
health care since 1982. Ron Pollack is the Executive Director.
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