Incentives Matter: Poor Lose Out on Medicare Part D

Since 2006 numerous insurers have stopped serving the low-income segment of the Medicare Part D program, forcing millions of beneficiaries to change prescription drug plans. Using data from participating plans, we found that Medicare payments do not sufficiently reimburse insurers for the relatively high medication use among this population, creating perverse incentives for plans to avoid this part of the Part D market. Plans can accomplish this by increasing their premiums for all beneficiaries to an amount above regional benchmarks.

Read the Health Affairs article on eliminating perverse incentives in Medicare.

Comments (4)

Trackback URL | Comments RSS Feed

  1. Tom H. says:

    Has anyone noticed? The poor always seem to lose out,no matter what reform we are talking about.

  2. Devon Herrick says:

    Health status is negatively correlated with income and education. Those with low incomes are more likely to be poor health compared to high-income seniors. It is no surprise that drug plans would seek to avoid low income enrollees due to the likelihood of increased expenditures.

  3. steve says:

    “Health status is negatively correlated with income and education.”

    So, do we increase the subsidy, increase everyone’s payments or drop the poor from the plan?


  4. Brian Williams. says:

    Tom H. is right. Government programs often crowd out the benefits of capitalism that would otherwise extend to poor people, leaving most poor people with no options other than the public programs (public transportation, public housing, public education).