Medicare Part D: A Successful Health Care Program

mhai_logoToday's guest post was written by Stephen C McCaffrey, President and CEO of Mental Health America of Indiana. This blog was originally posted on the Campaign for Modern Medicines.

As we look forward to the implementation of the Affordable Care Act, we should look back to Medicare Part D as a most recent example of a very successful health care program implementation. Not only does Part D provide access too much needed healthcare, it costs less than expected--and at the same time--it has helped lower overall health care costs.

As we know, Medicare is a federal health care program that provides coverage for individuals with disabilities who receive federal Social Security Disability Insurance benefits, as well as people age 65 and over. Serious mental illnesses are especially prevalent among those under 65 who receive Medicare benefits due to a disability. Approximately 37 percent of Medicare beneficiaries with a disability have a serious mental illness.

Starting in 2006, Medicare Part D established a unique public/private partnership to provide much needed drug coverage for seniors. Under the plan, seniors now choose from a wide variety of private drug plans. There are more than 1,000 across the country, with the federal government helping to cover the premiums.

Under Part D, the costs of psychiatric medication are covered, as are the costs of medication for other conditions. Medicare requires the drug plans operating under Part D to cover a comprehensive list of medications in specified classes, including antidepressants and antipsychotics.

The program is particularly important to individuals with mental illness who rely on medications to achieve and maintain their recovery. According to the National Institute of Mental Health, patients age 70 and older, who become symptom-free and continue to take their medications for two years, are 60 percent less likely to relapse than those who discontinue their medications. This positive health outcome would not be possible without the Part D benefit.

From a cost perspective, Part D’s cost is actually below what was forecast. In fact, the nonpartisan Congressional Budget Office says the program's budget is running more than 40 percent below its original projections, and average monthly premiums are more than $20 lower than the government thought they would be.

Moreover, as seniors now have access to drug benefits, they are staying healthier and imposing fewer costs on the rest of the Medicare program. One study[1] published by the National Bureau of Economic Research, found that for every dollar of extra spending on Part D drugs, the program reduced other Medicare costs by $2.50.

Amazingly everyone else has benefited as well. According to a study by economists at the University of Southern California and Boston University, the huge enrollment in Part D has given private insurers enough bargaining power to lower drug prices for everyone else by 5.3 percent[2].

Clearly, Medicare Part D is a recent example of a successful health care program. Aging Hoosiers with mental illness, as well as all seniors throughout the state, are healthier now because of their ability to access needed medications through Medicare Part D--and they do it at less cost to Hoosiers overall.

[1]A. Chandra et al. “Patient Cost-Sharing and Hospitalization Offsets in the Elderly,” American Economic Review, March 2010

[2]W. Yin & D. Lakdawalla. “Insurers’ Negotiating Leverage and the External Effects of Medicare Part D,” Working Papers Series WP2001-065. Boston University – Department of Economics, 2001

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