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Medicare Part D: A Model for Future Entitlement Reform

March 27, 2015

SUMMARY:When Congress created the original Medicare program in 1965, physicians had a limited arsenal of medicines available to treat chronic and acute maladies.

stethoscope and insurance docs

SUMMARY:

When Congress created the original Medicare program in 1965, physicians had a limited arsenal of medicines available to treat chronic and acute maladies. Like most health insurers at the time, Medicare did not include coverage for prescription drugs.

But an explosion of pharmaceutical research and innovation over the next several decades led virtually all private health insurers to add the coverage to their plans. They saw the evidence: If people took their medicines, they stayed healthier longer, they could avoid more invasive treatments including surgeries and hospitalizations, and overall health care spending often could be reduced. 

But it took 38 years for Medicare to catch up. In 2003, Congress passed and President George W. Bush signed the Medicare Modernization Act (MMA) which created the Medicare Part D Prescription Drug Benefit. It started operating in 2006.

Today, about 38 million seniors and disabled Americans on Medicare are enrolled in Part D plans, including employer-only group plans. More than 60 percent of them are enrolled in private prescription drug plans and the rest receive drug coverage through Medicare Advantage plans.

During debate over passage of the law, Medicare Part D was opposed by many for its $400 billion 10-year price tag. But Congress was going to pass a drug benefit. It was only a matter of how it was structured. Would it be another government-run benefit program, laden with micromanagement and price controls? Or could we try something new to engage consumer choice and competition in delivering the benefit? The Republican Congress opted for the latter. 

Article Tags
Health Care
Author
Grace-Marie Turner is president of the Galen Institute.
turner@galen.org