Major Savings from Medicare Drug Plan

According to a new study, Medicare’s 5-year-old prescription drug plan is saving the federal program approximately $12 billion a year by keeping seniors out of nursing homes and hospitals. The savings offset only a fraction of the $55 billion the government spends on the drug plan, known as Medicare Part D, per year. The authors of the study claim that it means seniors are enjoying a better quality of life and staying healthier.

Appearing in the Journal of the American Medical Association, the Harvard analysis found that Medicare saved an average of around $1,200 per year for each senior citizen who had insufficient drug coverage prior to Medicare Part D. Lead author Dr. Michael McWilliams of Harvard Medical School said that with subsidized drug coverage, seniors are able to afford drugs that lower cholesterol and blood pressure and control diabetes, thus preventing trips to the emergency room—and medical bad debt collection for seniors unable to afford medication and emergency room bilss.

Medicare Part D is voluntary and there were 23 million Part D beneficiaries last year. Enrollees pay premiums covering approximately 25 percent of the cost.

The Medicare drug benefit began in January 2006. Prior to that date, around 2,500 of the seniors in the study reported having generous drug coverage—often purchased as supplemental insurance—while around 3,500 reported having limited or no drug coverage.

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