The Medicare Payment Advisory Commission (MedPAC) has news for Congress: The Medicare Part D prescription drug benefits program seems to be too friendly to insurers.
MedPAC, a body created in 1997 to give Congress advice about improving Medicare, talks about what its 17 members believe to be the overly attractive nature of the Part D program in its latest report.
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Traditionally, Medicare did not provide drug coverage. Republican congressional leaders led efforts to build the Part D drug plan program into the Medicare Modernization Act of 2003 (MMA).
Congress and Medicare Part D managers wanted to make the program generous enough to get insurers to participate, but now the program may have to be redesigned to discourage insurers from adopting pricing strategies that may increase Medicare's share of the costs, MedPAC officials say.
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Private insurers have influential allies in Congress, and, over the years, they have fought off, or, at least, tempered, many legislative attacks on the Medicare Advantage and Medicare supplement insurance programs.
But lawmakers who think overly generous private plans encourage enrollees to use too much health care and drive up the government's Medicare costs, succeeded at getting restrictions on Medicare supplement plan provisions that completely eliminate enrollees' deductibles signed into law earlier this year.
Policymakers have to come up with the cash to keep the Social Security Disability Insurance (SSDI) program solvent after 2016, and efforts to rescue SSDI may give friends and foes of the Part D leverage they can use to defend or attack the program.
Many agents have been skeptical of the Part D market, but some seem to view it as attractive, and executives at some publicly traded insurers spend much more time boasting about the performance of their Part D programs than about their commercial major medical divisions. The Part D market has been an island of stability when compared with the markets heavily affected by the Patient Protection and Affordable Care Act (PPACA).
For a look at what MedPAC officials are saying about the Part D program, and what those observations could mean, read on.
1. MedPAC sees insurers gaming the system to hold premiums down and maximize enrollment.
Enrollee premiums account for only 14 percent of Medicare Part D revenue, according to analysts at the Henry J. Kaiser Family Foundation. General federal revenue covers 73 percent of the costs, and state governments pay 13 percent of the bills.
Program managers set the monthly premium paid to about 25 percent of the cost of standard drug coverage, then uses a bidding process to have plans pay as much as possible of the remaining cost, according to the Kaiser analysts.
In 2014, about 37 million people had individual or group Medicare Part D drug coverage. This year, the monthly base premium is about $33, up 2 percent from the 2014 base premium.
