Tampering with Part D will not solve our debt crisis

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Given the current climate and the debate over the debt limit, reform of Medicare--which faces a significant fiscal crisis--is inevitable. Anticipating these changes, the White House and key Democratic leaders in Congress recently introduced the "Medicare Drug Savings Act of 2011" as a means of saving $112 billion over the next decade by reducing spending on Medicare Part D-the prescription drug program for seniors. Based on the presumption that manufacturers are making extraordinary profits from the government, the proposed legislation would mandate that drug companies give the federal government rebates for low-income seniors enrolled in Medicare Part D.

Under the proposed legislation, AEI's Joseph Antos, a former Congressional Budget Office official, and Guy King, a former chief actuary for Medicare, find that:

  1. Many Medicare Part D plans could change significantly by restricting their benefits or taking other actions that disproportionally affect the most vulnerable seniors.
  2. Premiums for seniors would be likely to increase, with the strongest impact borne by low-income seniors who are likely to be displaced from their current Part D plans unless they pay more.
  3. Government spending on Medicare as a whole is likely to increase, offsetting savings to the federal budget.

 

Joseph Antos is the Wilson H. Taylor Scholar in Health Care and Retirement Policy at AEI. Guy King is an independent actuary and former chief actuary for Medicare and Medicaid.

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