Medicare Part D Plans Are on Diverging Paths

Medicare Part D plans have been subject to numerous changes and challenges since the program was implemented in 2006. In some ways, plans appear to have responded similarly; however, they have also diverged in important ways. The long-term trends highlighted in this report also suggest that recent Part D plan market changes reflect a confluence of factors. Future efforts to reform Medicare Part D should reflect the reality that Part D plans are increasingly distinct and ensure that Medicare beneficiaries retain the ability to choose the coverage option that works best for them. Read the full report.

• Medicare beneficiaries who want Part D coverage can enroll in either a stand-alone prescription drug plan (PDP) that covers only prescription drugs or a Medicare Advantage plan that provides all Medicare-covered benefits, including prescription drugs (MA-PD).
• PDPs and MA-PDs must contend with similar challenges, including rising prescription drug prices and numerous regulatory and legislative changes that have occurred since the Part D program was implemented in 2006.
• Closer examination of key Part D plan characteristics indicates that PDPs and MA-PDs have responded differently to these challenges, leading to a significant divergence in plan offerings over time.
• These differences are likely due to the availability of rebates that Medicare pays MA plans that allow MA-PDs to absorb the costs associated with more generous prescription drug coverage and still offer comparatively low premiums. PDPs do not receive similar rebates.
• Policymakers should recognize that PDPs and MA-PDs are increasingly distinct and should ensure that Medicare beneficiaries retain affordable access to the coverage option that works best for them.