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Part D Rates Miss Mark

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Many Medicare Part D drug plan carriers continue to generate large, unexpected profits and losses, officials write.

The U.S. Department of Health and Human Services lets the Part D carriers, or “sponsors,” build “expected profits” into their contract bids, but the carriers are supposed to pay part of any unexpected profits back to Medicare.

For 2007, the net total that the carriers owe to Medicare dropped to $18 million, from $4.4 billion in 2006, according to officials in the HHS inspector general’s office.

But 184 of the 251 plans sponsors charged rates that turned out to be too high, and they will have to pay $1.81 billion to Medicare, while 97 charged rates that were too low, and they will get $1.79 billion in payments from Medicare, officials write.

Unexpected profits could become more important to HHS later on, because, in future years, current Part D program rules would let carriers keep a higher percentage of unexpected profits, officials write.

The Centers for Medicare and Medicaid Services, the HHS agency that oversees Medicare, should “use available data from prior plan years to assist in the review of future bid submissions,” officials write. “CMS should also conduct additional checks on bids in which the sponsors owed or received large amounts for reconciliation.”

CMS also could ask Congress to let it continue to collect a high percentage of unexpected profits in future years, rather than letting the unexpected profits go to the carriers, officials write.

A copy of the HHS inspector general’s office Medicare Part D report is available here.