📋 Medicare Part D Trends: PDPs vs MA-PDs Diverging (AARP Article)

From AARP 

2003: On Dec. 8, President George W. Bush greatly expands Medicare by signing the Medicare Modernization Act, which establishes a prescription drug benefit. This optional coverage, for which beneficiaries pay an additional premium, is called Medicare Part D.

2006: On Jan. 1, Medicare Part D goes into effect and enrolled beneficiaries begin receiving subsidized prescription drug coverage.

2007: Medicare beneficiaries with higher incomes must start paying higher premiums for Part B, called the Income-Related Monthly Adjustment Amount, which was established by the 2003 Medicare Modernization Act.

The program allowed private insurers that the federal government regulates to sell voluntary, stand-alone drug plans to participants in original Medicare and to incorporate this coverage into most Medicare Advantage plans.

From the NIH - NIH.gov - National Library of Medicine - History of Medicare and Prescription Drug Coverage 

On December 8, 2003, President George W. Bush (R) signed the Medicare Prescription Drug, Improvement, and Modernization Act (P.L. 108–173), which authorizes Medicare coverage of outpatient prescription drugs as well as a host of other changes to the program. This new drug assistance program represents a major new federal entitlement for Medicare beneficiaries.

. . . . for many Medicare beneficiaries, the benefits of the new law were not so immediate or valuable. By mid-2004, the federal government  authorized cards that can be used to obtain price discounts on prescription drug purchases and will offered a $600 credit to about to millions of low-income beneficiaries.

In 2006 the full-fledged program was scheduled to begin. At that time, more than 40 million beneficiaries (number at the time) had the following options:

(1) they may keep any private prescription drug coverage they currently have;

(2) they may enroll in a new, freestanding prescription drug plan; or

(3) they may obtain drug coverage by enrolling in a Medicare managed care plan.

Between the time the law was passed and initiated, there was definitely some gaps in coverage for some beneficiaries - so we kind of worked into full coverage.   

Before 2004, unless a beneficiary had some other type prescription drug coverage, they were pretty much on their own.  I think Medicaid did help those who were very low income,  Between 2002 and 2006, when the law was activated, Medicare beneficiaries had some discount cards that helped with their med cost.  A now long gone Medigap plan - Plan J, had some prescription drug coverage built into it but it was limited.  In 2010 - that Medigap plan and a host of others that were very lucrative were all discontinued by CMS to be sold.  

Even now, Part D is voluntary but there is a penalty if not enrolled in a credible plan when Part A and Part B enrollment is taken.  

I do not have a traditional type Part D, I have creditable coverage from another source and it works fine for me at the present time but the formulary is different so there could be some drugs that my plan doesn’t cover that a Medicare or MAPD does cover or maybe vice versa - I don’t take many and they are all generic.  

Stand-alone PDP and MAPD are similar in many ways but IMO, because the insurers of the MAPD plans have a bit more wiggle room in plan design and CMS regulated cost control methods,  they are able to offer their prescription drug coverage at a bit of an advantage - as explained by your AARP article source.  

All beneficiaries should remember that these plans vary extensively based on a beneficiary’s circumstances - their income level, the cost and tier level of the meds they take, and therefore there are a lot of different plan designs to choose from in the current year.  From a basic plan to an enhanced plan - 

All beneficiary's should realize that the IRA (Inflation Reduction Act) passed during the Biden Administration changed the program - from the annual OOP limit to how much of the cost it placed on drug manufacturers and insurers - which they have slowly been switching a lot of this cost on to beneficiaries.  There was a stabilization plan that went along with the initiation of the program which many insurers took advantage of - so that helped shield them and and beneficiaries from getting the FULL effects of the premiums increases.  This stabilization program is still there - the Trump Administration elected to keep it but at a lower rate.  This will completely or mostly disappear in 2027 so we have not seen the end of premium increases based on this stabilization being completely removed.  

So on one hand the IRA helped a lot of people with the annual OOP limit and changing the various stages of coverage - but it is costing all beneficiaries more whether or not they got any break from the redesign - but hey, that is what insurance does - spread the risk and the rewards.