As President Obama begins to grapple with sweeping changes to our national healthcare system, he should first turn his attention to the obvious flaws in an existing program. Medicare Part D, the prescription drug benefit for the elderly, came into existence in 2006 amidst much confusion in the marketplace. Many elderly people who did not fully understand the Part D process enrolled in the wrong types of prescription drug plans, and the fragmented nature of the industry meant that the many health insurers offering Part D plans did not individually have sufficient clout to negotiate drug prices with manufacturers. Fortunately for the insurance companies, Part D reimbursed 80 percent of drug costs irrespective of amount. Now, a recent study in the journal Health Affairs has concluded that the cost of prescription drugs under Part D in the past three years has been more than triple the market value of those prescriptions.
Early proposals anticipated that drug manufacturers would be forced to lower their prices, but what actually happened was that prices for the most-used medications shot up. This led to huge profits for the large pharmaceutical firms. So how to fix this problem? The U.S. Department of Health and Human Services, Centers for Medicare and Medicaid Services should be empowered to negotiate drug prices directly with pharmaceutical companies on behalf of all Part D enrollees, and then reimburse private insurers pursuant to an approved drug price schedule rather than by paying 80% of drug costs. Federal and state regulators should regulate sales and pricing of Part D plans, to eliminate the marketplace confusion that persists, and should encourage insurance companies to offer plans with set features and approved premium ranges. If Congress wants to see the cost of healthcare lowered for all Americans, cleaning up the confusing aspects of Part D would be a good start.