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Part D Prescription – budget buster?

Well, our officials in Washington have lost their minds. How else to explain the requirement by Medicare officials that the new Medicare Part D programs “”offer a surprisingly generous array of prescription drug choices”?
Pharmaceutical firms are likely ecstatic about the news, as the “open formulary” combined with the prohibition against the Federal government negotiating drug prices means that there is likely to be many drugs offered at what the pharmas will deem to be appropriate prices.
CMS Administrator Mark McClellan,and Babette Edgar, a pharmacist at CMS both claim that the diverse population covered under the Medicare and Medicaid programs necessitates a diverse formulary. According to a New York Times article cited in California HealthLine, the original cost assumptions for the Part D program may have to be reworked, as they assumed a narrower formulary. The result – costs will be higher than previous projections. Here’s the quote:
“In 2003, the Congressional Budget Office estimated that the Medicare prescription drug benefit would cost $395 billion over 10 years, but earlier this year, CBO raised the estimated costs of Part D drugs to $849 billion between 2006 and 2015 (California Healthline, 3/11). According to the Times, CBO cited the federal formulary requirements as one factor in its higher estimate.
CBO Director Douglas Holtz-Eakin said the agency’s estimates so far have assumed that Medicare drug plans would use “restrictive formularies” to help control spending. He added, however, that with the broader drug lists being required by the government, CBO “now expects that prescription drug plans will be slightly less effective at controlling drug spending than we had previously assumed.”
CMS denies costs will be driven up, citing the plans for the Part D vendors to use cost control mechanisms similar to those used by commercial plans. The problem with that statement is that Part D vendors are specifically prohibited from using many of these techniques, such as prior authorization.
The last estimate indicated the program, originally forecast to cost $395 billion over ten years, will actually cost just under $900 billion over the same period. With these “unforeseen changes” costs may get close to the trillion dollar mark.
What does this mean for you?
I’m not sure; but if the Chinese decide to stop providing loans to the Federal government, it is either higher taxes, drastic cuts in other governmental programs (it is tough to get $100 billion by cutting HeadStart or NASA budgets), or cancellation of the program.

2 thoughts on “Part D Prescription – budget buster?”

  1. Actually, in this case, CMS revised a “penny wise, pound foolish” regulation. A large number of Medicare beneficiaries have conditions, such as mental illnesses, for which it has taken years to stabilize on specific medications. To cause destabilization via restricted formularies would result in skyrocketing costs, including potential lost employment, ER services, rehospitalizatation, police or criminal justice involvement. It’s a rare event, but here CMS actually responded to constituents beyond the pharmaceutical and insurance companies.

  2. Lyn – thanks for the observation and insight. My point is “specialty” medications can and should be covered, but only after a step therapy process has been followed. The concern re the wide formulary is these meds are all available from day one. Do I have this wrong?

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Joe Paduda is the principal of Health Strategy Associates



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