Medicare Drug Subsidy Mainly Replacing Private Spending

Four of every five dollars the federal government spends under the Medicare Part D drug plan do not allow seniors to obtain drugs they could not otherwise afford. Instead, this spending mainly substitutes for money that seniors and their private insurers would have spent anyway.

[The NBER study by] ¬†authors Gary Engelhardt and Jonathan Gruber concluded that much of the new coverage and spending under Medicare Part D served to crowd out previous private insurance coverage: about 80 percent of Medicare’s spending on this program simply displaced private spending.

This finding is consistent with the NCPA’s previous research on the same topic, estimating that more than 90% of the new spending would replace existing private spending.

Comments (8)

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  1. Ken says:

    This is mind blowing. We create a multi trillion dollar unfunded liability — greater than the unfunded liability in Social Security — and we find out that only one dollar out of five –one in ten according to the NCPA — actually pays for a drug the senior could not otherwise afford.

  2. Joe S. says:

    I agree this is a terrible waste and to make matters even more surprising, it is a Republican boondoggle at that.

  3. Bruce says:

    More depressing news.

  4. Larry C. says:

    And this is occuring why? Because the government has so much surplus money to waste?

  5. Tom H. says:

    Worst domestic policy program of the Bush administration.

  6. Devon Herrick says:

    More than two-thirds of seniors already had drug coverage prior to the MMA. There is little reason for a former employer to continue providing what is available from government. We are seeing this now that the PPACA remove the subsidy designed to encourage employers to retain retiree drug plans. It makes sense that Medicare Part D plans will slowly replace retiree drug plans and most of the prescriptions filled under Medicare Part D merely substitute for private spending that would have occurred prior to Medicare Part D.

    Undoubtedly, some seniors have gained access to drugs. But at the same time, some seniors are consuming too many drugs — many of which are contraindicated.

  7. Greg says:

    What a disgusting waste of money.

  8. Art says:

    What did you expect with either Part D or Obama care; both of which “passed” by one vote “in the dead of night” or by “kickbacks to states and Senators”!

    Presidents shouldn’t be allowed to sign into law anything that is so marginal and costs so much!!