Further cuts in what the government pays to providers will inevitably reduce quality and access to care for seniors. With the number of baby boomers turning 65 expected to grow from an average of 7,600 a day in 2011 to more than 11,000 a day in 2029, the urgency for reform grows daily. The Bowles-Simpson Commission on Fiscal Responsibility and Reform said “federal healthcare spending represents our single largest fiscal challenge over the long run.”
But it is crucial that the program continue to meet its commitment to seniors. The data show where our focus should be: From 1987 to 2006, 10 chronic diseases—including hypertension, diabetes and arthritis—accounted for about half the growth in Medicare spending. According to the Centers for Disease Control and Prevention, chronic disease accounts for nearly 75% of overall health spending in the U.S.
For a Congress divided over where and how best to reduce spending, tackling the issue of chronic diseases should be a national priority within the broader Medicare reform debate. The question is, how best to do it.
There is one program that offers a solution, a program that is both popular and under budget: the Medicare prescription drug benefit, Part D.
Just after Congress created Part D, the Medicare trustees estimated that Medicare beneficiaries would pay an average of $61 a month for their drug benefit by 2013. Instead, the average premium has remained consistent at about $30—about where it was when the program began.
During the same period of time, premiums for Medicare Part B, which covers doctors' visits and other outpatient care, have increased from an average of $89 in 2006 to $105 in 2013.
Part D works differently from traditional Medicare: Part D offers seniors a choice of plans that are competing with each other to offer the most comprehensive selection of drugs at the lowest price. Seniors have shown they are smart shoppers, and they are the ones who have driven down the cost of the program. Overall, the cost of the Part D benefit to the federal government is 43% under budget projections.
We need a new path forward for the rest of Medicare, and Part D is a model.
In a rare move, last November the nonpartisan Congressional Budget Office changed its methodology to take into account the effect that prescription medicines can have on spending in Medicare. The CBO estimates that for every 1% increase in the number of prescriptions filled by Medicare recipients, spending on Medicare and other federal programs that include drug utilization is anticipated to decrease by roughly 0.2%.
Part D shows that better access to the right medicines can help reduce the cost of healthcare. It's simple: If people take their medicines, they can control their diseases and avoid expensive hospital stays. Chronic diseases are less deadly when patients stick to their regular treatment program.