How insurers kept extra cash from Medicare

Most health insurers' forecasts for providing prescription-drug benefits to more than 40 million people on Medicare have, thanks to Medicare's payment rules, resulted in more revenue for the firms.

Most health insurers' forecasts for providing prescription-drug benefits to more than 40 million people on Medicare have, thanks to Medicare's payment rules, resulted in more revenue for the firms. A Wall Street Journal investigation found that as a consequence, the insurers kept $9.1 billion more in taxpayer funds than they would have had their estimates been accurate from 2006 to 2015. Medicare Part D was designed to help hold down drug costs by having insurers manage the coverage efficiently. Instead, Part D spending has accelerated faster than all other components of Medicare in recent years, rising 49% from $62.9 billion in 2010 to $93.8 billion in 2017. Medicare experts say the program’s design is contributing to that increase. Private insurers submit "bids" estimating how much it will cost them to provide the benefit. Then Medicare uses the estimates to make monthly payments to the plans. If the insurer overestimated its costs, it pockets a chunk of the extra money it received from Medicare—sometimes all of it. In 2015, insurers overestimated costs by about $2.2 billion, and kept about $1.06 billion of it after paying back $1.1 billion to the government. The companies say the pattern of overestimates identified is the result of unpredictable drug pricing by pharmaceutical manufacturers. Insurers say they strive to make accurate bids, which are certified by professional actuaries.