Medicare’s Part D drug coverage was set up to be provided solely by private plans which “bid” for enrollee membership. This creates a level of competition which it was believed would help reduce costs. It is not, however, a system of perfect competition in which bids are purely compared to each other. A Congressional Budget Office Presentation looked at how the system appears to affect bids. (CBO Presentation) Looking at the fee-for-service Medicare population, about 60% of beneficiaries chose a plan that was priced within $6 of the lowest premium plan. There is a tendency to switch plans if the premium of the current plan rises relative to other premiums and about 12% of existing beneficiaries select a new plan each year. Market concentration seems to play a role in bids and premiums, as regions with more sponsors do have lower premiums. The researcher looked at multi-region sponsors and compared their bids in regions with varying numbers of total sponsors and over several years. It appears that for each additional plan sponsor in a region, bids decrease about a half-percent. Since many regions have as many as 15 or more sponsors, this is not an insignificant effect and directly reduces the out-of-pocket spending for beneficiaries. Competition could be even more intense if the benchmark was eliminated, complete freedom was given on formulary decisions, the catastrophic coverage was based on estimated, not actual, costs and the low-income subsidy enrollment process was revised. But generally the competitive nature of Part D has kept costs well-below those originally estimated for the program, which should be a lesson for the basic Medicare program.
✅ Subscribe via Email
About this Blog
The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry. Mr. Roche is available to assist health care companies through consulting arrangements through Roche Consulting, LLC and may be reached at [email protected].
Healthy Skeptic Podcast
This is an outstanding report on total global drug spending and trends, with projections out to 2025. It helps you understand this important area of health care, which does much...
June 1, 2021
MedPAC 2019 Report to Congress
June 18, 2019
Mercer, a large benefits consulting firm, confirms that health plan premiums are rising in 2023, publishing survey results showing that employers expect an increase of costs by at least 5%....
December 9, 2022
More money pouring into young health care companies as Dispatch Health gains $330 million in new capital to deliver high acuity health care in a patient’s home, rather than a...
November 30, 2022
A lot of money is invested in health care startups and growth companies, since health care is 20% of the economy, but the returns aren’t always good. Here is another...
November 1, 2022
Access ACO Care Management Chronic Disease Comparative Effectiveness Consumer Directed Health Consumers Devices Disease Management Drugs EHRs Elder Care End-of-Life Care FDA Financings Genomics Government Health Care Costs Health Care Quality Health Care Reform Health Insurance Health Insurance Exchange HIT HomeCare Hospital Hospital Readmissions Legislation M&A Malpractice Meaningful Use Medicaid Medical Care Medicare Medicare Advantage Mobile Pay For Performance Pharmaceutical Physicians Providers Regulation Repealing Reform Telehealth Telemedicine Wellness and Prevention Workplace