Medicare drug plans: ACA, don’t mess with success

Provisions throughout the Affordable Care Act (ACA) will hurt seniors, says Devon Herrick, a senior fellow at the National Center for Policy Analysis.


Older Americans are about to be hit with a series of new laws and regulations that will seriously impact their quality of, and access to, care. The Medicare Modernization Act (MMA) of 2003 provides drug benefits and employer retiree drug plan subsidies to nearly 39 million Medicare beneficiaries. Of these, nearly 36 million are enrolled in a program known as Medicare Part D.1 [See Figure I.]

$716 billion has been cut from Medicare over the next 10 years in order to fund the ACA.

Physicians are facing a 25 percent fee reduction for treating Medicare enrollees.

The Independent Payment Advisory Board will have the power to reduce Medicare spending, regardless of the adverse impact on doctors who treat those enrolled in Medicare.

Medicare Advantage (MA) plans cover 25 percent of seniors and add $825 in benefits to enrollees each year. But the ACA plans to cut funding for these plans.

On top of this, the Centers for Medicare and Medicaid Services (CMS) plans to do away with preferred pharmacy networks (arrangements between drug companies and pharmacy networks that promise exclusive business in exchange for lower drug costs) in Medicare Part D plans.

This will only raise the cost of drugs and restrict access to them for many. Of the 39 million Americans on Medicare, 36 million are enrolled in Medicare Part D plans.

Currently, pharmacy networks bid to offer their drugs at low cost and the winning bidders agree to exclusive arrangements with drug plans. The CMS proposal would not allow drug plans to exclude the pharmacy networks that do not offer the lowest prices; rather, it would allow all of those networks to participate in the drug plan on the same terms as the winning bidder.

This leaves no incentive for pharmacy networks to offer low costs, as they are assured the ability to participate in a drug plan regardless. Drug plans would lose all bargaining power, and pharmacies will only be incentivized to bid higher.

All told, nearly 14 million seniors with Medicare Part D will lose their drug plans if preferred networks are banned for 2015.

Source: Devon M. Herrick, “Medicare Drug Plans: Don’t Mess with Success,” National Center for Policy Analysis.

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