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Value of Medicare Advantage
Prescription Drug Plans

Medicare Part D coverage is offered through private plans that are approved by the federal government. Beneficiaries who enroll in Medicare Fee-for-Service (FFS) have the option to purchase a standalone prescription drug plan (PDP) to supplement their coverage. Alternatively, beneficiaries can choose to enroll in MA-PDs, which integrate prescription drug coverage with other Medicare benefits (Parts A and B) into one plan with one monthly premium.

The Facts

50.5 Million Enrolled in Medicare Part D

Established in 2006 by the Medicare Modernization Act (MMA), more than 50.5 million, or roughly 76% of all Medicare beneficiaries, are now enrolled in Medicare Part D coverage, either through standard PDP’s or Medicare Advantage Prescription Drug plans (MA-PD).

Greatly Expanded Coverage

While Part D was considered controversial at the time of its passage, primarily due to the cost to government and the use of private plans to operate the new benefit, Part D has been a successful program. It greatly expanded coverage for prescription drugs to millions of Medicare beneficiaries, and the annual costs of the program have been below spending projections.

MA-PDs comprises a growing share of overall Part D enrollment as more beneficiaries choose plans with integrated medical and drug benefits. Most Medicare Advantage enrollees (92%) are in Medicare Advantage plans that provide prescription drug coverage. By integrating prescription drug coverage with other Medicare benefits in one plan, MA-PD plans are able to coordinate care and manage costs across both the medical and drug benefits compared to PDPs.

Additionally, while the Part D program requires all plans to offer at least a minimum level of benefits, MA-PD plans are allowed to use a portion of their Medicare Advantage capitated payments to offer lower premiums, reduced cost-sharing, or coverage of more drugs, and supplemental benefits.

Despite the rising costs of prescription drugs, Part D plans have been able to offer stable premiums to beneficiaries since the program’s inception. While there have been significant changes made to the Part D program, there is also increasing interest in addressing the cost of prescription drugs, both in Part D and for drugs covered by Part B.

#ValueOfMAPD

Medicare offers three forms of subsidies to Part D plans.

These payments are intended to ensure plan participation by taking potential risk of high cost enrollees away from plans.

The low-income subsidy (LIS) program assists in subsidizing Part D premiums, deductibles, coinsurances, and copayments for eligible enrollees.

In 2023, 27% of beneficiaries (13.4 million) received LIS, of which 62% (8.3 million) were enrolled in integrated MA-PD plans.

MA-PD plans integrate prescription drug coverage with other Medicare benefits in one plan

Because of this these plans are able to coordinate care and manage costs across both the medical and drug benefits compared to PDPs.

Part D plans have been able to offer stable premiums to beneficiaries since the program’s inception

despite the rising costs of prescription drug costs.

Payments to PDPs are determined through a bidding process

and enrollee premiums are tied to plan bids, similar to #MedicareAdvantage. There is a standard benefit design in Part D, outlined in the graphic here.

Most #MedicareAdvantage enrollees (88%) are in MA plans that provide prescription drug coverage.

Take a look at Avalere Health analysis using enrollment data released by the Centers for Medicare & Medicaid Services.

MA-PD plans are uniquely positioned to coordinate care and manage costs for their enrollees

particularly those with multiple chronic conditions, because they offer coverage that integrates medical and prescription drug benefits.

Part D plans also use utilization management tools to ensure beneficiaries have access to the most effective, lowest-cost prescription drugs.

Value of Medicare Advantage Prescription Drug Plans