Six years after its launch, the most recent data available show that Medicare Part D is costing the government less than half as much as initially projected. And beyond being a lot less expensive than forecast, the program gets rave reviews from the people it was designed to help – America’s senior citizens.



The Medicare Modernization Act of 2003 established the new Part D prescription drug benefit.  A year before the law was implemented (2005), the Congressional Budget Office (CBO) projected the cost of Part D at $123 billion by 2012. But actual Part D spending will be only $60 billion this year, as the chart shows.  Overall program spending has remained so far below initial estimates that in March 2012, the CBO reduced its estimate of Part D spending by $107 billion. 

Although lower enrollment and slower drug spending growth contribute, Part D plans – administered by the private sector -- have decreased program costs by obtaining significant rebates, often ranging from 20 percent to 30 percent, on brand-name prescription drugs.[1]  In addition, competition among Part D plans has spurred investments in promoting the use of less costly, but equally effective generic drugs and developing pharmacy networks that ensure strong access while keeping costs in check. And the private sector has also increased consumer choice by offering Medicare beneficiaries a wide variety of plan choices at various price points.

Today, Part D covers nearly 30 million people.  On average, they can choose from 31 PDPs in addition to several Medicare Advantage plans that include a drug benefit.  Premiums remain lower than expected and this year they actually decreased modestly from 2011. 



Also, multiple surveys have shown that people like the benefit – a lot. One of the latest, conducted by KRC Research for the non-partisan Healthcare Leadership Council (HLC) in 2011, found that 88 percent of beneficiaries are satisfied and 95 percent have greater peace of mind thanks to Part D coverage.  Ninety-four percent said their plan was easy to use, while 67 percent said that they now have lower prescription drug spending – up 8 percentage points since 2006.

Medicare Part D has shown that competition among private plans brings value and coverage choices to Medicare.  Part D has had some growing pains, but overall the program has been a success, and one that policymakers could learn from as they consider options for strengthening other parts of Medicare.