Medicare Part D Fifteen Years On

Open a newspaper and you’re sure to read plenty about the logjam on Capitol Hill. The New York Times warns of Congress entering “a near-permanent state of gridlock,” while The Daily Beast reports “our political system is grinding to a halt.” The problem is, commentaries like these don’t tell the full story.

This same Congress, for example, put partisan differences aside weeks ago to pass a sweeping legislative package combating the opioid crisis in a near-unanimous vote. And it has passed the most on-time spending bills in more than two decades with bipartisan support. Furthermore, while not bipartisan, this Congress enacted the most significant rewrite of the tax code since 1986.

In 2003, when I was a Congressional staffer with the House Ways and Means Committee, we heard the same gloom-and-doom talk. That November, the Washington Post lamented, “It’s been a long time since partisanship was as deep as it is now.”

Yet the very same month, Congress would come together in a historic act of bipartisanship to pass the single biggest change to Medicare since 1965: the “Part D” prescription drug benefit. By Christmas, President George W. Bush had signed this new lifeline for millions of American seniors into law.

Recently, I had a chance to reminisce about that day — and the success of the Part D program since — at a Washington D.C.-area event convened by industry group MAPRx featuring remarks from the former President himself and many of my past colleagues.

We recounted the long and difficult weeks leading up to Congressional passage of the Part D law — by my count, committee staffers had one day off work in 17 weeks, including weekends — and the careful footwork required by the administration and Congressional leaders to secure Democratic support without alienating conservative hardliners.

We also discussed the state of Medicare Part D today, and where to go from here.

The program remains a great success story. Part D has cost tens of billions of dollars less than expected, earned high marks from nine out of 10 seniors, and quantifiably reduced elderly mortality. What’s more, average premiums for beneficiaries are projected to decrease for the second year in a row. Like any teenager, however, the program faces some challenges.

Even with Part D in place, prescription affordability and access remain a challenge for too many. As lawmakers consider the future of the law that I was privileged to help write, they should consider the following three principles around which to shape reforms.

Reward Value

In private markets, drug manufacturers and payors are already working together to lower drug costs through models known as value-based payment arrangements or “VBAs” wherein drug makers are reimbursed for a product’s effectiveness rather than the volume of prescriptions. Some arrangements come with money-back guarantees if a drug doesn’t work. Others require manufacturers to pay for hospital stays if their product fails to prevent an inpatient admission.

Sadly, decades-old laws prevent such innovative arrangements in Part D. 

For example, the 1972 Anti-Kickback Statute — intended to prevent under-the-table deal making in federal health programs – is widely interpreted to prevent adoption of VBAs. Running afoul of the law carries stiff penalties, including fines and jail time.  

A lengthy list of exceptions — or “safe harbors” — to the statute exist, but none explicitly protect VBAs. That’s why we’ve championed a safe harbor specifically for prescription drug arrangements that tie reimbursement for medications to agreed-upon patient outcomes.

In August, the Trump administration put out a call for public feedback on this very idea — a promising sign. My organization, The Council for Affordable Health Coverage, is also working with Congress to accomplish this through legislation.

When combined with similar tweaks to Medicaid and reforms to enhance communication between drugmakers and payors, we estimate that the healthcare system could see up to $47 billion in annual savings.

Protect Consumers

While polling shows seniors are overwhelmingly pleased with their Part D coverage, those with the most severe health-care needs remain threatened by the law’s lack of a hard cap on out-of-pocket expenses for beneficiaries.

Under current law, enrollees are required to pay up to 5 percent of their drug costs above the catastrophic coverage threshold. That small coinsurance rate can still wreak havoc on the finances of those requiring costly medications or with multiple chronic conditions.

An analysis by IQVIA found that the likelihood of a beneficiary abandoning a prescription at the pharmacy is strongly associated with out-of-pocket cost. In fact, 62 percent of patients beginning a specialty medicine will abandon treatment when facing costs greater than $125 — a level of cost sharing that is not uncommon.

As policymakers seek to address this challenge, they must look to the private sector.

Most private insurers limit the out-of-pocket expenses that consumers rack up in a given year. These commonsense caps bring peace of mind to patients, and payors aren’t getting shortchanged either: The Society for Human Resource Management noted just last year that, overwhelmingly, plans are setting their own out of pocket caps at rates below those mandated by the government.

Medicare Part D should take a page from private insurers’ book and offer similar protections for its 43 million beneficiaries.

Preserve What Works

Medicare Part D could use a tune-up, but Congress must resist the temptation to fix what isn’t broken. Last year, for example, Democratic lawmakers introduced sorely misguided legislation to repeal Part D’s noninterference clause, subjecting the program’s price negotiations to direct meddling from government bureaucrats.

This ignores the reality that Part D’s success is driven by market competition — not government control. Private insurers already negotiate with drug firms to secure discounts to the tune of 35 percent for Part D patients.

Opening up these negotiations to government interference will not lower costs — a fact that has been affirmed by the nonpartisan Congressional Budget Office. It could, however, allow the government to set prices unilaterally and refuse to cover medicines deemed too expensive — harming seniors’ access to care and turning a working formula into a broken promise.

Medicare Part D has a proud history and a bright future, but action is needed to ensure the program can realize its fullest potential.

Count me as optimistic. I know that Congress can overcome long odds and break through deep partisan divisions to improve public health because I watched it happen right before my eyes 15 years ago. Medicare Part D’s growing pains offer a golden opportunity to do that again now.

Joel White is the president of the Council for Affordable Health Coverage. Learn more at CAHC.net.