Medicare Part D prescription drug rebates would increase monthly premiums for seniors

Including Medicare Part D prescription drug rebates in the final debt ceiling package would increase monthly premiums by up to about 40 percent for more than 17 million seniors, according to a new analysis of government data.  The analysis, by the American Action Forum, examined the Part D rebates proposal offered by the Obama Administration and Congressional Democrats that would require drug manufacturers to pay a Medicaid-style premium for the opportunity to sell prescription drugs to low-income seniors who qualify for Medicare and Medicaid.  It concluded that the plan would have a far reaching impact, forcing other seniors to pay higher premiums and hurting the successful and popular Medicare prescription drug program. The Forum will be hosting a press conference call today at 10:00 AM.

"This proposal would be a bad deal for Medicare and a raw deal for millions of seniors," said Douglas Holtz-Eakin, president of the American Action Forum and co-author of the analysis.  "This is a price-fixing scheme that will take money out of the pockets of senior citizens and greatly reduce customer choice."

The analysis, Cost Shifting Debt Reduction onto America's Seniors, relies on Congressional Budget Office reports and other research to examine the impact of adding Medicaid Part D "rebates" to the Medicare program for low-income seniors.  It found the higher the premiums are paid to the government, the greater the impact on consumers, either within Part D or other markets. Specifically, the analysis found that monthly Medicare premiums would increase between 19.6 percent to 39.4 percent for seniors who are not deemed low-income, and the total annual out-of-pocket costs for these seniors would increase between $1.5 billion to $3.7 billion.  

The proposal to add Medicaid-style rebates to the Medicare Part D program has been introduced in Congress by Representative Henry Waxman (D-CA) and Senator Jay Rockefeller (D-WV).  It was also endorsed by the White House in The President's Framework for Shared Prosperity and Shared Fiscal Responsibility fact sheet, which was released by the White House on April 13, 2011.

In addition to raising premiums, the new rebates could increase prescription drug costs for other Medicare beneficiaries as well as the general public.  Fifty percent of the value of any rebates would be absorbed by Americans who purchase prescription drugs outside of Medicaid programs. According to the analysis, "to the extent that deeper discounts are paid to the government, a share of manufacturers' added costs for these discounts could ultimately be borne by consumers, either within Part D or in other markets."

"The Medicare prescription drug benefit is one of the only bright spots on the entitlement landscape, costing less than projected and delivering real value for seniors.  The last thing the President and Congress should do is turn it into a Medicaid-style program," said Michael Ramlet, director of the Forum's Operation: Healthcare Choice and co-author of the analysis.