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April 2007
by James C. Musser, ASBA Washington Representative

After its first full year of operation, Washington has good news for seniors on the success of the new Medicare Prescription Drug Program. By every measure — cost, enrollment, choice of coverage and satisfaction with the plan — the Medicare Rx Plan has delivered better than expected results. ASBA focused on getting seniors and other eligible individuals enrolled when Medicare Part D, the other name for the program, was rolled out in late 2005. Now let's take a look at the program after its first full year of operation.

In what may be a first for a federal entitlement program, the cost of the Medicare Rx Plan was substantially lower than all estimates. In fact, the cost of the program is a full 30% lower than originally predicted when it was enacted in 2003. That represents a lower cost by some $189 billion. The high level of competition among the various prescription drug providers made costs lower and increased the number of options seniors had in selecting a plan at an affordable price. The initial estimate for monthly premiums in 2006 was $32 but, in fact, the actual monthly premium averaged $23 and it is expected to be nearly the same in 2007.

Acting Administrator for the Centers for Medicare and Medicaid Services (CMS) Leslie Norwalk said, "Strong, competitive bids and informed beneficiary choices are bringing down premiums yet again. The bottom line from the news today is that beneficiaries are paying less in premiums and taxpayers are seeing billions of dollars in savings."

Because of the Medicare Part D program, over 90% of senior citizens and disabled persons now have comprehensive prescription drug coverage, which is more than double the number of seniors with prescription drug coverage than before Medicare Part D was enacted. Despite the fact that the program was brand new and offered a vast array of choices in benefit plans, which many thought too complicated for seniors, enrollment in the program was smooth for the majority of seniors. The wide variety of benefit plans offered by competing insurance companies has allowed beneficiaries to choose a plan that best fits their needs and, on average, seniors and disabled individuals have saved $1200 per year on their drug costs.

When the Medicare Rx Plan was being developed, there was a fear that there would not be enough competition in the marketplace but that proved to be an unfounded fear. Every state offers multiple plans providing seniors with a wide variety of choices in coverage. In fact, the real problem has been deciding which plan best fits the individual's needs because there is such a wide array of options. The various plans may cover as many as 4300 drugs in their formularies, up from about 3800 drugs last year. This wide coverage at reasonable cost has lured many veterans away from the one-size-fits-all government-run VA prescription plan.

The other good news is the beneficiaries are happy with the program. Surveys of seniors by J.D. Powers, the Kaiser Family Foundation, ABC and the Wall Street Journal have found that between 75% and 85% of all beneficiaries are pleased with their coverage under Medicare Part D. Very few government programs command that level of satisfaction from enrollees. In short, the Medicare Rx Plan has been a great success in its first year.

Check back each month for the latest from our nation's capital. ASBA will be closely monitoring the all the issues affecting you and your family.

James C. Musser, Esq. is a legislative consultant based in Falls Church, Virginia. His reports are updated monthly.