Executive Summary: How Medicare Part D Beat the Odds—and Why Policymakers Should Care

An expensive, partisan, and massive new entitlement, wrongly conceived, poorly designed, and awkwardly executed. While that sounds like charges being leveled at the Affordable Care Act, those were actually the indictments against Medicare Part D, enacted 10 years ago. Today, Part D is among the most popular federal programs.

How did Medicare Part D go from worst to first, and are there lessons for the Affordable Care Act—the newest vilified health care program? This report examines Part D’s achievements and the critical lessons that Part D can teach policymakers as they implement the ACA and design health policy in this decade and beyond.

Achievement #1: Fourteen Million More Seniors with Rx Coverage.

Prior to Part D’s enactment, 75% of Medicare’s beneficiaries had some sort of prescription coverage. Today, 90% of Medicare beneficiaries have prescription drug coverage.

Lesson: Expand coverage with assistance that follows the person as both Part D and the ACA do.

Achievement #2: Consumers Given More and Better Choices.

Prescription drug coverage is normally combined with comprehensive insurance benefits for employees, but that wasn’t an option under traditional Medicare. Part D now gives beneficiaries 31 prescription drug plan choices, on average.

Lesson: Enable health plan competition with a stable marketplace as Part D does through Medicare and the ACA does through health insurance exchanges.

Achievement #3: Nearly $200 Billion under Budget.

In 2003, the Congressional Budget Office (CBO) estimated that Part D costs over the next decade would be $552 billion. CBO now estimates that the actual cost was just below $358 billion. Half of these savings came from lower costs per person.

Lesson: Enable Americans to save money by making choices about their coverage as both Part D and the ACA do.

Achievement #4: Drug Prices Stabilized.

Prior to Part D, Medicare beneficiaries without prescription drug coverage were paying high retail prices for their medicine. Part D gave beneficiaries bulk purchasing power and drove down drug prices by about 10%.

Lesson: Give private health plans the incentive to negotiate lower prices and pass on the savings to consumers.

Achievement #5: Large Increase in Less-Costly Generic Drug Usage.

Although critics worried that the rebates that drug plans negotiate with brand name pharmaceutical manufacturers would discourage the promotion of generics, Part D plans have increased the prescriptions filled with generics from 90% of prescriptions that could be possibly filled with generics in 2007 to 96% in 2011.

Lesson: Enable health plans to encourage the use of lower-cost medicine (or providers, in the case of the ACA) by setting lower copayments and other strategies.

Achievement #6: Fewer Costly Hospital Stays.

Part D reduced Medicare beneficiaries’ total health care costs by $13 billion in 2007, which was about one-quarter of Part D’s total costs.

Lesson: Health care services cannot be viewed in silos—smart policy changes in one area of health care can positively affect other areas.

Achievement #7: Customer Satisfaction.

94% of beneficiaries are satisfied with Part D; satisfaction with coverage has increased since the start.

Lesson: Provide consumers with a range of choices and support in making decisions.

Achievement #8: Seniors Saved Money.

Part D lowered the number of beneficiaries spending more than one-fifth of their income on prescription drugs from 14% in 2003 to 7% in 2010.

Lesson: Prioritize coverage for those most in need.

Achievement #9: High Participation among Low-Income Beneficiaries.

87% of low-income beneficiaries are automatically enrolled in Part D.

Lesson: Use automated tools to identify and enroll eligible populations.

Achievement #10: Mended, Not Ended.

Part D was not perfect when it passed under Republican leadership, with a large coverage gap known as the donut hole.

Lesson: Instead of opposing the new law and seeking to de-fund the program, policymakers worked to mend it and make it better, not end it.

Despite its many achievements, Medicare Part D still has room for improvement. Enrollment can still be increased for all Medicare beneficiaries and for those eligible for the low-income subsidy program. And beneficiaries should have new tools to make better financial choices for their cove