While we’ve been focused on what’s wrong with Part D’s implementation, Joe Paduda reminds us all about one of the other problems with Part D. It’s that by it’s nature a voluntary benefit is going to attract adverse selection. In other words, the only people signing up for it so far — and barring the dual eligibles who were involuntarily alloted into it there haven’t been too many, and DSS reports that there won’t be that many more — are the ones with big drug costs. So by definition eventually the plans will start losing money.
For now the PDPs are being covered against that risk, and the very generous taxpayer will make up the difference. But later on the taxpayer may not be so generous (as with Medicare Risk in the late 1990s) at which point the PDPs will start to exit.
This, by the way, is exactly the inverse of the problem with HSAs, where all the healthy people will leave the insurance pool, leaving those behind in a death spiral.