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Impact on Medicare Program for Investment Income That Medicare Part D Plans Earned and Retained From Medicare Funds in 2009

If Federal requirements had been established to delay the prepayments to private, stand-alone drug plans and private Medicare Advantage health plans that have a drug coverage component (which we collectively refer to as "Part D plans") until after the beginning of the beneficiary's coverage period by the same number of days that the plans held Medicare funds, the Medicare Part D trust fund could have earned approximately $111.2 million of interest income in calendar year (CY) 2009. Alternatively, if Federal requirements had been established to require Part D plans to reduce their revenue requirements in their bid proposals to account for anticipated investment income, Medicare could have saved an estimated $5.3 million that the 706 Part D plans that were included in our sampling frame earned in CY 2009.

In contrast to the Federal requirements that govern the Medicare Part D program, the Federal Employees Health Benefits program limits the ability of companies to retain as additional revenue investment income earned from Federal funds. According to our reviews of 52 Part D plans, the Medicare program loses potential savings associated with investment income that Part D plans earn between the time that they receive prepayments from CMS and the time that the Part D plans pay for pharmacy claims.

We recommended that the Centers for Medicare & Medicaid Services (CMS) evaluate these audit results and, in the context of its joint efforts with the U.S. Department of the Treasury, either (1) pursue legislation to adjust the timing of Medicare's prepayments to Part D plans to account for the time that these plans invest Medicare funds before paying pharmacy claims or (2) develop and implement regulations that require Part D plans to reduce their revenue requirements in their bid proposals to account for anticipated investment income. CMS did not concur with our recommendation.

Filed under: Center for Medicare and Medicaid Services