Private Foundations Help Medicare Beneficiaries and Taxpayers Save Money

Ross Marchand

May 3, 2018

When it comes to federal entitlement programs, Medicare Part D often wins ‘best-in-show,’ costing less than originally estimated while maintaining overwhelming satisfaction from participants. Now a new study from Avalere sheds light on how to help all Medicare programs mirror Part D’s success – to the benefit of federal taxpayers across the country. 

One secret to Medicare Part D’s success is that it allows private providers to negotiate directly with manufacturers as a means of controlling costs. Also key to the program’s success, as Avalere points out, are the foundations, like Patient Services, Inc. (PSI), which help patients on Medicare Part D afford their copays and retain access to the drugs they need. 

These institutions provide much-needed financial relief to beneficiaries, and ensure the sickest patients don’t skip treatments or delay care because of high prices. In turn, this reduces the cost of all Medicare programs, such as Part B, which covers hospitalizations and acute care. Because patients do not have to ration medicine or care, they are more likely to remain healthy, improving their quality of life and saving these programs money in the long term.

These features may sound narrow and technical, but savings for taxpayers are anything but trivial. Avalere estimates that, for every $1 million that PSI spends supporting patients, Medicare saves nearly $500,000 across all programs. These savings totaled just shy of $40 million in federal savings in 2017. 

The government still has a long way to go in reducing unnecessary cost contributors to pharmaceuticals. Additional measures need to focus on increasing transparency in the drug supply chain, by holding middlemen such as Pharmacy Benefit Managers (PBMs) accountable for murky accounting and resulting cost escalation. As the Avalere study shows, all of Medicare can learn from Part D and the private sector.

 A history of failed government interventions in the medical sector proves that holding back private incentives drives prices higher and harms quality. Government interference in healthcare distorts the market, and because of rising insurance premiums, forces taxpayers to foot the bill, taking critical resources away from national defense, schools, and infrastructure.

The third-party nature of the system, enforced by unfixed tax code provisions and Obamacare coverage requirements, results in horror stories like the $629 band-aid. This “market fixing” between the government and insurers results in widespread waste, with around 20 percent of all spending going toward unnecessary tests and services conducted each year. The problem is significantly pronounced on the public insurance side of the system, as Medicaid pumps more than $500 billion per year into the system with little discernible impact.

Given these gargantuan distortions in the marketplace, private-public models are essential in identifying best practices and helping to improve care for patients. Cutting the cost of these programs saves valuable taxpayer dollars while improving patient outcomes – a result everybody can agree on.