Medicare Has an Obamacare Problem
The Washington Post this weekend published a story adopting talking points from the Bipartisan Policy Center nearly verbatim, to state that Medicare has a spending problem on pharmaceuticals. The piece alleges that Medicare Part D spending on prescription drugs will rise much faster than Part A spending on hospital care or Part B spending on physician payments over the next ten years – “facts” which the BPC uses to argue for an expansion of Medicaid price controls to Medicare Part D.
However, this “analysis” cleverly ignores, and in several cases outright distorts, the effects of Obamacare on spending for all three parts of Medicare – because as it turns out, the 2700-page law didn’t help control Medicare spending, and actually made the Part D problem worse:
Medicare Physician Spending (Part B): The BPC chart presumes that a scheduled 30 percent reduction in physician payments for 2012, and further reductions in future years, will take effect – which everyone knows will not happen. Obamacare did not create this problem, but the law did put into place $500 billion in payment reductions that “will not enhance the ability of the government to pay for future Medicare benefits” – in other words, it missed an opportunity to solve it.
According to the Congressional Budget Office, leaving physician payment levels flat – giving doctors no payment increase at all for the next decade – would raise Medicare Part B spending by over 12% in 2021 when compared to the current Medicare baseline. Providing physicians an update linked to medical inflation would raise Medicare Part B spending by nearly 17% in 2021 when compared to the current Medicare baseline – evaporating most of the supposed difference between Part B and Part D spending levels.
Medicare Hospital Spending (Part A): Here, the unrealistically low levels of spending cited in the BPC chart WERE created by Obamacare. The Medicare actuary has previously stated that these payment reductions could cause 15 percent of all Part A providers to become unprofitable by 2019 – and 40 percent by 2050. Both the Medicare actuary and CBO agree that these payment reductions are unrealistically low, and will eventually have to be overridden.
Medicare Drug Spending (Part D): In this case, Obamacare increased Part D spending, by filling in the “doughnut hole” in the prescription drug benefit for brand-name and generic drugs alike. And in what should be a shock to no economist, if you subsidize something, people will buy more of it. Obamacare provides a new subsidy for brand-name drugs, which will have the effect of discouraging seniors from buying lower-cost generics instead. The Congressional Budget Office noted that Obamacare will increase both federal spending and beneficiary premiums in Part D, because seniors will increase their prescription drug spending.
The Post quotes a BPC analyst as saying that Obamacare “did a fair amount to curb Part A and Part B costs over the next decade, but very little on Part D.” As explained above, this is a highly misleading statement, in two respects. First, Obamacare only “curbed costs” to the extent that it created new and unrealistic price controls that will eventually have to be overridden. Second, and most importantly, Obamacare did NOT do “very little” to control Part D spending – it actually contributed to the problem, by encouraging seniors to buy more costly brand-name drugs.
It’s fundamentally misleading, but sadly typical, for liberals to have government manufacture a problem – in this case, raising federal spending by incentivizing people to buy more expensive pharmaceuticals – and then call for government to step in and “fix” the problem government itself created. In other words, the real issue is not Medicare’s so-called “drug problem” – it’s the left’s hypocrisy problem.