January 12, 2007

House Votes to Severely Alter Popular Medicare Rx Program

In its much-publicized first 100 hours, the U.S. House of Representatives moved legislation that could seriously undermine the year-old Medicare Part D program.

• The House voted to replace market-based, private-sector competition in the Medicare drug benefit program with price negotiations that would be handled by the federal government.
   
• This government-centered solution will, if enacted, undermine the principles of consumer choice and market competition that have improved the health and lives of millions of seniors.

The Medicare prescription drug benefit is one of the most successful, popular and effective federal programs in recent memory. It’s perplexing the House would seek to make fundamental changes to the program.

• Millions of seniors had no drug coverage before the Part D benefit began.  Now, the Medicare drug benefit is saving seniors, on average, $1,200 per year.
   
• Independent polls show that about 80 percent of seniors approve of this prescription program that offers real choice.  Surveys by the Kaiser Family Foundation, J.D. Power & Associates and other show widespread satisfaction with the current program.
   
• Part D now relies on a model that emphasizes choice and competition – not government price controls. The market-based model has resulted in beneficiaries choosing plans with very low premiums, minimal or no deductibles, and a wide range of covered medicines.
   
• The drug benefit’s track record shows savings to taxpayers.  Thanks primarily to lower pharmaceutical costs, Part D will cost $200 billion less than estimated over the next decade.

The House legislation, H.R. 4, attacks the foundation of the Medicare prescription drug benefit.

• A different foundation risks yielding different results. In this case, a shift away from price-lowering competition, conducted by firms that represent tens of millions of beneficiaries and have extensive negotiating experience can hurt seniors.
   
• The harm is easy to foresee. When government sets prices, it inevitably determines which medicines are covered and which are not. Seniors will find their drug choices sharply limited.
   
• The nonpartisan Congressional Budget Office said unequivocally that federal involvement in Medicare drug pricing won’t save any money – unless there are severely limited formularies, like those used by the Veterans Administration.  It’s not an insignificant fact that 40 percent of VA beneficiaries have chosen to purchase a Part D prescription drug plan.

Given the success of the Part D program, it’s impossible to make a compelling case for H.R. 4. This legislation could end up depriving seniors of the ability to choose the coverage option that is most appropriate for their circumstances. Today, if a Part D plan doesn’t cover a desired medication, a beneficiary can choose a different plan that does offer that drug. Under a government-controlled program, there is no such recourse.  For the sake of millions of seniors, the Senate should take a more prudent approach.