Reducing the Number of Drug Plans for Seniors

An examination of case studies to determine the potential of an alternative system of Medicare prescription drug benefits in which the government winnows available choices found that the proposed system meets all of its evaluation criteria and is therefore a viable option.

The authors argue that the current Medicare prescription drug benefit plan, which relies on private insurers, offers a baffling number of insurance plans from which to choose. They suggest an alternative system in which the government narrows down available options so that beneficiaries can choose from a more manageable number of plans.

In the alternative system, companies would apply to sell prescription drug coverage to Medicare beneficiaries and an oversight body would select which insurance plans Medicare could offer. The authors examined one pension-related and two health-related case studies, and assessed the proposed system based on competition, choice, quality, simplicity and stability.

The proposed system meets most of the positive features of the five criteria. For example, insurance plans would compete to participate for beneficiaries’ business, while Medicare would ensure simplicity and stability by reducing the number of available choices and providing three-year contracts. Although health insurers would likely oppose the proposal, it could better serve beneficiaries’ needs than the current system.