PBMs

The Medicare Trust Fund, which is in the red and on track to reach insolvency by 2026, needs every penny it can get.  Thanks to the Recovery Audit Contractor (RAC) program, $8.2 billion in improper Medicare payments has been recovered since its nationwide implementation in 2010.  RACs operate on a contingency fee basis, so their work does not cost taxpayers a dime.  Rather than celebrate this successful program, members of Congress, the Centers for Medicare and Medicaid Services (CMS), and special interests, particularly the hospital trade associations, are conspiring to kill it.

Medicare Part D is one of the few government-created programs that has consistently cost less than the Congressional Budget Office’s (CBO) original estimates.  Every fall, seniors get to choose from a variety of plans for their drug coverage.  Pharmaceutical companies, pharmaceutical benefit managers (PBM), and pharmacies know this and they compete vigorously for seniors’ business.  A PBM is a third party administrator of prescription drug plans (Well-known PBMs are Catamaran, CVSCaremark, Express Scripts, Humana Pharmacy Solutions and USScript).  PBMs negotiate drug prices, establish formularies, process, and pay prescription drug claims in private insurance, as well as Medicare.  This robust competition among private sector entities is the major reason that Medicare Part D costs less than originally anticipated; rather than employing heavy-handed government edicts or price controls, market forces keep prices low and satisfaction high.  So, why would the Centers for Medicare and Medicaid Services (CMS) suddenly move to “fix something that ain’t broke”?