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Medicare Part D Enhancements that Would Deliver Savings & Choice, Not Higher Premiums for Seniors


It’s widely agreed that Medicare Part D is one of the most successful public-private partnerships, delivering affordability and value to seniors. Since its inception in 2003, the program has provided millions of seniors with access to affordable prescription drugs and innovative new treatments. This has all been accomplished under original budget projections.

A major reason Part D is successful is because it brings together Medicare, the gold standard of federal government health benefits, with private sector innovation in order to create a competitive marketplace where seniors can choose prescription drug coverage that work best for them.

In Part D, insurers can design and offer up to three different plans – one basic and two enhanced options – for seniors to choose from in a specific geographic area. Part D plans compete and innovate to deliver the right balance of benefits and coverage at the lowest possible cost, and to build options that will work for seniors’ health needs and budgets. And seniors value this choice: a recent poll by CAPD found that 91% of seniors are satisfied with their Medicare Part D coverage.

However, the Administration is considering a disruptive and one-size-fits-all approach to changing Medicare Part D, called the “Rebate Rule” Executive Order. Currently, pharmacy benefit managers (PBMs) negotiate rebates on drug prices from pharmaceutical manufacturers and pass nearly 100% of these savings back to Part D sponsors, the insurers managing the plans. A recent report by the Government Accountability Office found Part D sponsors use rebates to keep plan costs low for seniors and the federal government.

But the Rebate Rule would limit Part D plans’ ability to use these savings and would undermine the key successes of Part D. Government estimates project it will increase federal spending by nearly $200 billion and premiums by as much as 25% for the majority of seniors.

Instead, we need to build on the successes of Part D and promote competition and innovation that lower drug costs for seniors. A bill offered by Senator Pat Toomey (S. 3013) would allow each Part D sponsor to offer four plans per geographic region, which would increase the diversity of plan offerings that are created and offered to seniors.

Senator Toomey’s bill allows Part D to design plans with point-of-sale rebates, and the options that work best for seniors will win out in the marketplace, rather than imposing heavy-handed policies that will negatively impact seniors across the board.

Importantly, the bill would also allow Part D sponsors to create an additional two plan offering as long as one of them passed at least 10% of the rebate savings they negotiate from drug companies back to Part D plan beneficiaries at the pharmacy counter – often called “point-of-sale rebates.” 

This bill would give Part D sponsors the room they need to begin experimenting and developing this form of plan design for seniors, as they have with Part D plans more broadly over nearly two decades. Members of Congress should consider passing this bill to ensure Part D remains responsive to the needs of seniors while continuing to deliver high quality, affordable prescription drug coverage under budget.