Medicare Wasting Billions on Prescription Drugs

Medicare is spending billions of unnecessary dollars on its Part D prescription drug program, researchers found. The waste, according to a study from the University of Pittsburgh, is generated by the way Medicare assigns low-income enrollees to health plans. Findings suggest that if Medicare were to assign participants in the Part D program to health plans based upon their medical needs, as opposed to the random assignment method the government has been using, the savings would add up to billions.

Random Assignment Strategy

Because of the random assignment strategy that is currently being used, most beneficiaries are being placed in plans that are not the least expensive option for their particular medical needs. The effect, says the study, is that beneficiaries are left holding the bag for excess out-of-pocket expenses while the government does the same with unnecessary copayments. Assigning beneficiaries to plans that don’t fit their needs leaves some beneficiaries in a position of having to make additional trips to the doctor to get specific prescriptions or increased quantities of particular medications.

Intelligent Reassignment

The study suggests that “intelligent reassignment” is the change that Medicare Part D assignment protocol needs. According to the study, an assignment protocol which intelligently matches Part D enrollees with prescription drug plans could save the government approximately $743 per individual. Across a pool of 10 million participants in the Part D program, the savings would add up into the billions.

Government Action Needed

Using Medicare drug claim data from 2008 and 2009, the study exposes a substantial fault in the Part D assignment process. Yuting Zhang, the study’s lead author, suggests that the fault can be corrected by the government; in fact, Zhang says the government has sufficient data to make “intelligent reassignments.” However, a change in the assignment process would require more than a change in CMS policy; it demands a change in the law, which means the random assignment isn’t going anywhere without congressional action.