Is Part D Saving Medicare Money?

A new study finds that the Medicare Part D drug program lowered non-drug medical spending by $1,224 lower for enrollees who previously did not have insurance for drugs. The savings was mainly due to reductions in hospitalization and skilled nursing presumably because drugs were substituting for more expensive inpatient therapies.

Since the federal subsidy for Medicare part D drug plans was about $1,067 per enrollee (data for 2008).  This implies Medicare makes money on those seniors who had a problem and needed help obtaining drug coverage. However, this savings is offset by money wasted on seniors who already had drug coverage and didn’t need additional subsidies. Indeed, more than four-out-of-every-five dollars in Medicare drug spending is replacing spending that would have occurred without Medicare drug plans.

Comments (4)

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  1. Larry C. says:

    Interesting post. If the program were designed just to help those who really need help, it would pay for itself. But because it provides huge subsidies to people who needed no help, it has an unfunded liability greater than that of Social Security.

  2. Devon Herrick says:

    Similar to preventive care, giving subsidized drugs to seniors is bound to help some seniors more than others. The trick is to discover which segment of the population to help. Medicare Part D was a shotgun approach that replaced some private (employer) subsidies with taxpayer subsidies.

  3. alex d says:

    Medicare Solutions can help you find the best medicare drug plans to fit your life and budget. With a list of providers, health plans listed by state and commonly asked questions, Medicare Solutions is the leader for assistance with medicare supplement.

  4. Dean says:

    It is true, it ends like we spend out of pocket along with the monthly premium. So I have stopped paying my premium and opted for only generics. I have been saving only with generics by getting them online at International Drug Mart.