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Democrats’ Plan to Reform Drug Benefit is Snake Oil

Democrats’ Plan to Reform Drug Benefit is Snake Oil
November 09
09:21 2012

On the campaign trail, President Obama was fond of claiming to have “strengthened Medicare” during his first term. Even though Obamacare robs the program of $716 billion, the president has tried to massage the facts a little, arguing that “we used those savings to lower prescription drug costs.

It’s all a bit rich. Not only is Obama cutting the healthcare entitlement for seniors to the bone, he’s also behind a push that would dismantle the wildly popular Medicare Part D prescription drug benefit — even though it has proven to be the most cost effective part of the program.

If our conservative leaders don’t do what it takes to defend Part D, drug benefit beneficiaries — including many of the over 550,000 Louisiana seniors who rely on the program — will see their premiums go up.

Signed into law by President George W. Bush in 2003, Medicare Part D is the only federal entitlement to keep costs low through the use of market forces. Part D allows seniors to shop around for the private drug benefit plan that best meets their needs. This choice-based structure keeps insurance companies on their toes by forcing them to compete for customers.

The result? Medicare Part D has brought down drug costs for millions of seniors and has done so at a much lower price to taxpayers than originally predicted. In fact, it has cost around 43 percent less than first thought possible. Better yet, with a satisfaction rate of 88 percent, seniors in Louisiana and throughout the country have reported being overwhelmingly pleased with the program.

Despite this undeniable success, Democrats are considering a shortsighted plan that will distort the program’s competitive structure and drive up Medicare costs for all beneficiaries. It’s now incumbent upon conservative lawmakers to defend Part D from this attack from the left, and preserve the one aspect of Medicare that isn’t threatening to bankrupt the nation.

Democrats have long supported a rebate that would force drug companies to sell medicines to the government at a below market rate for the roughly nine million seniors who qualify both for Medicare and Medicaid. (In beltway wonk-talk, these folks are referred to as “dual-eligibles.”) The effect of this plan, if implemented, would be profound.

Since biopharmaceutical firms rely on revenues from drug sales to fund immensely costly research and development, they’ll need to make up this lost money somewhere. Unfortunately, it’s most likely to come from the pockets of Medicare beneficiaries who happen not to be dual-eligibles.

Research from the Lewin Group has found that if rebates are enacted the costs for non-dual-eligibles could rise by as much as 25 to 50 percent. Another paper by former head of the Congressional Budget Office, Douglas Holtz-Eakin, suggests that the average Medicare drug benefit enrollee would see a premium hike of between 20 and 40 percent as a result of the rebate.

As healthcare expert Grace-Marie Turner plainly put it: “The proposed rebate is a tax, pure and simple, and it would be paid by other Medicare beneficiaries in higher premiums for their prescription drug plans, by other consumers in the form of higher drug prices, and by lower-income beneficiaries in the form of fewer choices and restricted access to drugs.”

By some stretch of logic, Democrats argue that a drug rebate such as this will help get a handle on Medicare’s rising costs. Their grasp on public policy, however, seems a bit questionable.

For one, Part D is not blame for the skyrocketing costs of healthcare or the looming insolvency of Medicare. If anything, Congress should be using lessons learned from Medicare Part D to help devise a more large-scale reform of Medicare.

Fortunately, Louisiana has leaders like Congressman Steve Scalise has a long, distinguished record of defending Medicare and defending the kinds of market-based reforms that will keep the program from insolvency. In September, in fact, he was given the Standing Up for Seniors award for his work on just this issue.

The attack on Part D is an opportunity for all Republicans to demonstrate to American voters who has the better plan for saving Medicare. Particularly for Louisiana seniors, it’s an issue that transcends party lines. Lucky for Republicans, they have what it takes to win this issue on the merits.

Bruce Donnelly

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