Medicare spending slowdown: Thank Part D


Medicare spending is slowing down drastically--thanks, for the most part, to Part D. The Medicare prescription drug program has accounted for more than 60 percent of Medicare spending cuts since 2011, according to a Health Affairs blog post.

This past spring, the CBO lowered its projections of total Medicare spending from 2012 through 2021 by $370 billion, notes Health Affairs. "The $225 billion of that decline accounted for by Part D represents an astounding 24 percent of Part D spending," the authors wrote. 

Another reason for the slowdown: Beneficiaries are getting younger and using fewer services, as well as lower payments issued to doctors through the sustainable growth rate (SGR) formula and Affordable Care Act payment constraints

Of course, this is good news for both beneficiaries and the federal budget. However, it's wise to tread lightly with this finding, suggests Health Affairs.

The authors note that because certain big-name prescription drugs lost patent protection, cheaper, generic drugs have surfaced. This then, in turn, decreases the rate of introduction of costly brand-name drugs.

What's more, a recent Congressional Budget Office (CBO) report described how capitalizing on competition has cut Medicare prescription drug spending, FierceHealthPayer: AntiFraud recently reported. Overall use of generic drugs in Part D jumped from 67 percent to 78 percent between 2007 and 2010.

It's possible this is just a passing trend, the authors of the blog post point out. Which is why it's prudent to remain cautious about the spending slowdown.

So, how does this spending slowdown affect payers?

Every $1 decrease in Medicare spending on a surgical-level procedure leads to a $1.30 decline in spending among private payers, according to a study by researchers at the University of British Columbia (UBC) and the University of San Diego. It's possible such a relation between Medicare and pricing for healthcare services can lead to distortions when the program overpays for healthcare services, FierceHealthFinance previously reported.

For more:
- here's the blog post

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