Medicare Part D (the Medicare prescription Drug Program), is the second Republican attempt at privatizing Medicare. Medicare Advantage was the first and this Program cost the American taxpayer 14% more than original Medicare.
Over the next 10 years, Medicare Part D will cost the American taxpayer a whopping $806 billion. (in contrast, Medicare Part A cost the American taxpayer nothing).
It was passed in 2003, by a Republican Congress. Representative Paul Ryan (the author of the current GOP privatization plan for Medicare) was one of its champions.
Before we look at how well or how poorly the program is working, let’s first look at why Republicans want to privatize Medicare. Extreme right wing Republicans do not believe there is any place for government in the role of its citizens, other than defense. They also believe that a “free market” place will keep costs down both for seniors and for the government. That is their ideological basis for “privatization.”
But there is a third and perhaps more critical reason for how and why Medicare Part D was established and that is, the power of the pharmaceutical industry in the United Sates over Congress. From 1998 through 2011, the pharmaceutical industry in the United States spent over $2.3 billion lobbying Congress. In addition, at least 25 former Congressman being paid multi-million dollar salaries to lobby Congress on behalf of the health care industry.
Now, let’s look at how Medicare part D works as a privatized version of Medicare.
First, let’s make it clear. Medicare Part D is not a free market enterprise. There were no stand alone prescription drug insurance policies prior to the creation of Medicare Part D. Not for seniors, not for young people. They were not economically viable for private insurers. In order to be enticed to provide Prescription Drug Insurance, Private insurers had to be handed massive government subsidies.
Second, Medicare Part D private insurers receive 89% of their funds, NOT from the premiums that seniors pay for part D insurance; but from Federal and State government sources. In other words, the Federal and State governments are paying private insurers to provide prescription drug insurance to people who are enrolled in Part A and/or Part B Medicare.
Third, about 17.7 million of the 47 million Americans enrolled in Medicare Part A, are also enrolled in stand alone Medicare Part D Prescription Drug Plans. Of these 17.7 million, about 8 million receive help from Medicaid in paying their premiums because they are low income. Approximately 9.9 million Americans are enrolled in Prescription Drug Plans that are offered as a part of Medicare Advantage Plans. Of these 9.9 million Americans, approximately 2 million also receive aid from Medicaid to pay their premiums. Another 6.4 million are still working and their employers receive government subsidies for their drug insurance coverage. (source for #3)
Fourth, the number of Prescription Drug Plans that are offered in any one state varies from 25 to 36. Sounds good, until you realize that not all plans offer to cover the drugs you need. There may be only 1 or 2 plans in your state that cover the drug you need. In those cases, they aren’t really competing for your business. They have a monopoly.
Why is it important that we look at what Medicare Part D really is? Because it is the model that the Republicans are using to suggest that “privatizing” Medicare overall would be a good, cost efficient and effective model for delivery of health care insurance in the United States.
There is no doubt that having some sort of Prescription drug insurance is a good idea for older Americans. Some sort of drug insurance is better than none.
But this year alone, the American taxpayer will pay private insurers $52 billion to provide drug insurance coverage to older Americans. Over the next 10 years, Republican passed Medicare Part D will cost taxpayers a whopping $806 billion.
The question is not, is Medicare Part D better for seniors than no prescription drug coverage? The question is — what is the best way, the most cost efficient and effective way to deliver prescription drug insurance to older Americans.
Medicare Part D: Operations Under Intermediate Cost Projection Assumptions
| Year | Premium Revenue (Billions of dollars) | Revenue From States | Total Revenue | Expenditures | Shortfall |
|---|---|---|---|---|---|
| 2011 | 7.7 | 7.1 | 14.8 | 67.1 | 52.3 |
| 2012 | 8.7 | 8.4 | 17.1 | 68.8 | 51.7 |
| 2013 | 10.7 | 8.9 | 19.6 | 79.4 | 59 |
| 2014 | 12.5 | 9.2 | 21.7 | 85.2 | 63.5 |
| 2015 | 14.46 | 9.5 | 23.96 | 92 | 68.04 |
| 2016 | 15.66 | 10.2 | 25.86 | 100.6 | 74.74 |
| 2017 | 17.4 | 10.9 | 28.3 | 109.5 | 81.2 |
| 2018 | 19.1 | 11.8 | 30.9 | 119.3 | 88.4 |
| 2019 | 21.1 | 12.7 | 33.8 | 130.2 | 96.4 |
| 2020 | 23.06 | 13.8 | 36.86 | 143.2 | 106.34 |
| 2021 | 24.26 | 15.1 | 39.36 | 155.9 | 116.54 |
About Georgeana Mimms
This is presented as startling news, yet this shortfall has been known, analyzed, predicted since year 1. Pay – Go (pay for programs as they are made law … Otherwise no program) disappeared in the Bush administration. Count the ways this flawed Medicare D was born: no competitive bidding for right to sell prescription drugs in the program, no means testing to qualify participants, and finally, with no eye on deficit spending, the program is launched right at the beginning of The Most Expensive Generation’s entrance into Medicare. I heard the number $60 billion shortfall in year 1, moving quickly to a perennial $100-120 billion per year after that. That’s approximately 300 million dollars a day — a familiar figure: the same cost as our recent war in Iraq, also a largely off the tax rolls item