While the Medicare and Social Security Trustees Report contained much bad news, there was a silver lining: competition has created additional cost savings for both seniors and taxpayers within the Medicare prescription drug program (Part D).
Original estimates from the Medicare actuaries projected that from 2004 to 2013 the Part D benefit would cost $634 billion. However, yesterday’s Trustees Report predicted the costs for that same period of time are now $378 billion – a 40% savings for taxpayers. In competing for seniors’ business, Medicare prescription drug plans have an incentive to negotiate deep discounts and keep monthly premiums low. This model compares favorably to the outdated, traditional government-run Medicare program, where Part B monthly premiums are reaching unaffordable levels and the hospital trust fund, which finances Part A, is predicted to be bankrupt in just 8 years.
It should also be noted that if the Democrats had gotten their way, monthly Part D premiums would be $42 this year. However, due to robust competition between insurance plans and a program design that allows the private market to work, premiums average only $28 per month in 2009.
To recap: competition has created savings for taxpayers AND seniors.