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Medicare Monday: 4 Things You May Not Know about Competition in Part D

Allyson Funk   |     March 16, 2015   |   SHARE THIS

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In recent weeks, our #MedicareMonday series has discussed how Part D helps save lives and helps save money for beneficiaries with chronic conditions. Thanks to the program, patients living with high cholesterol, hypertension, diabetes, congestive heart failure and other conditions can access the prescription medicines they need.

Why has Medicare Part D been successful, both in keeping costs down and improving patient health? In a word, competition.

Competition is a primary driver of savings and success in the Medicare Part D program. Here are 4 things you might not know about competition in Part D:

1. Robust private negotiation in Part D creates savings for beneficiaries and taxpayers. 

Part D plans negotiate discounts and rebates directly with drug manufacturers, which results in rebates of as much as 20 to 30 percent for brand-name medicines. Additionally, average rebate levels have increased each year of the program. These savings are passed on to beneficiaries and the program overall.

2Competitive bidding helps reduce program costs.

According to a recent report from the Congressional Budget Office, plans submitted lower bids to provide Part D coverage in areas with more plans and therefore more competition. Thanks to the competitive nature of the market, Part D bids are actually lower today than when the program began.

3. Competition helps keep premiums steady for beneficiaries.

Part D’s competitive design encourages plans to compete on premiums because beneficiaries tend to enroll in plans with lower premiums. When plans compete, beneficiaries save. Premiums have remained relatively stable for the past five years and well below initial estimates when the program began.

4. Broad choice means beneficiaries can find a plan that meets their individual health and financial needs.

In 2015, there are at least 24 plans available in each region of the country. Evidence shows that beneficiaries are successfully selecting plans that minimize their out-of-pocket premium and drug costs. A recent study found that beneficiaries reduced their average annual out-of-pocket costs by almost $300 from 2006 to 2007 by switching to a new plan. Even beneficiaries who did not switch plans still benefited from plan competition, saving an average of $134 from one year to the next.

tn_MedMonCompetition plays a key role keeping program and premium costs low for both beneficiaries and taxpayers. Stay tuned every Monday for more Medicare Part D-related content, and follow the #MedicareMonday hashtag for additional details. Also be sure to share how Part D competition has benefitted you in the comments section below. We’d love to hear from you!

Read other Medicare Monday posts.   

Get updates on Medicare and/or other relevant issues here Get Updates

Allyson Funk

Allyson Funk Ally is a senior director of public affairs at PhRMA focusing on Medicare, Medicaid, the Affordable Care Act, and other public programs. Her previous experience includes leading health communications for a large membership organization, supporting public affairs clients, and working for the governor of Louisiana. Ally enjoys travel, trying new restaurants and spending time with Buddy, her 9-year-old rescue Pomeranian. In the fall, she and her husband are almost always wearing Saints gear.

Topics: Part D, Medicare, Medicare Monday

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