Democrats Raid Medicare to Pay for Obamacare (Again!)

As Ronald Reagan would say, “There they go again.” A decade after Democrats raided Medicare by more than half a trillion dollars to fund Obamacare, House Speaker Nancy Pelosi (D-Calif.) and her Democratic colleagues recently introduced new Obamacare legislation that would raid Medicare by nearly another half-trillion dollars.

Sadly, the House plans to vote on this legislative package before the Independence Day holiday. Lowering spending in one unsustainable entitlement to fund another represents the height of fiscal irresponsibility. For Democrats, however, it looks like par for the course.

Obamacare on Steroids

Democrats have titled their bill the Obamacare “enhancement” act — and for good reason, because it would effectively put the law on quite the figurative steroids. The bill would stymie recent efforts by the Trump administration to offer more insurance options to consumers, such as short-term, limited-duration insurance and association health plans.

Instead, it would make skyrocketing premiums “affordable” by dedicating more taxpayer dollars towards Obamacare exchange subsidies, while also directing $10 billion per year to insurance companies via a new — and permanent — federal bailout fund.

The legislation would also balloon Obamacare’s Medicaid expansion to able-bodied Americans. It would require states to keep individuals on the rolls for 12 months, allowing affluent individuals to remain in this “low-income” program. The income cap on coverage for children would also be eliminated, permitting states to cover children of millionaires while receiving federal dollars for doing so if they choose.

At a time evidence already suggests significant waste and fraud takes place among individuals receiving Medicaid coverage, the Pelosi legislation would add to the ever-increasing budget woes of numerous states by forcing them to keep ineligible individuals on the rolls.

Socialist-Style Price Controls

How would Democrats fund all this new spending? From Medicare.

The Obamacare “enhancement” legislation includes drug pricing provisions that the House of Representatives passed last December. The provisions would require drug companies to “negotiate” prices with the Department of Health and Human Services (HHS),  which would effectively dictate prices to drug companies based on benchmarks laid out in the bill. Companies that do not “negotiate” would face excise taxes that could cause the manufacturer to lose money on every drug it sells in the United States.

The Congressional Budget Office confirmed back in December that these “negotiation” provisions would lead to the development of fewer drugs, as companies invest less in research and development. The CBO also said, however, that the blunt price controls would reduce Medicare and Medicaid spending. So Democrats used these price controls to fund their recent Obamacare expansion bill.

Raiding Medicare (Again)

According to CBO, the vast majority of the savings from drug pricing — a total of $448.2 billion over ten years, to be exact — used to fund the Obamacare bill comes from Medicare. That the Democrats are effectively raiding Medicare to expand entitlements for younger Americans makes the Obamacare “enhancement” legislation all the more odious and irresponsible, though, at this point, we really shouldn’t be surprised.

We’ve seen this act before. Indeed, the Obama administration spent years trying to justify the raid on Medicare. Kathleen Sebelius, then the HHS secretary, testified before Congress that provisions in the law would “both” extend Medicare’s solvency and pay for Obamacare. This is a position that defies both logic as well as common sense.

As it stands, Medicare has already become functionally insolvent. The year before Obamacare’s passage, the program’s trustees projected the Hospital Insurance Trust Fund would run out of money to pay all its bills in 2017 — three years ago. The Obamacare double-counting gimmicks that Sebelius testified about may appear to have extended the program’s solvency, but if only on paper. But the true cost of these things cannot remain hidden forever. According to current projections, even the funds from these phony solutions will run out by 2026.

Doing the Wrong Thing About Medicare’s Insolvency

Yet what would Pelosi and House Democrats do about Medicare’s looming insolvency? Not just nothing — worse than nothing. Rather than using the savings from their socialistic price controls to make Medicare solvent, they would take that money and throw it at health insurers to prop up Obamacare. As shocking as it may seem to some, this behavior echoes Pelosi’s 2011 interview with CNBC, when she bragged about how Democrats “took half a trillion dollars out of Medicare” to pay for Obamacare.

The Obamacare “enhancement” demonstrates how Pelosi and her fellow Democrats don’t care about fiscal responsibility or protecting America’s seniors. Instead, they view Medicare just as they did in 2010: A slush fund to raid on a whim as part of their effort to expand government-run health care at any cost.

This post was originally published at The Federalist.

The Good, The Bad, and The Ugly of Nancy Pelosi’s Drug Pricing Proposal

During the midterm election campaign, Democrats pledged to help lower prescription drug prices. Since regaining the House majority in January, the party has failed to achieve consensus on precise legislation to accomplish that objective.

However, on Monday a summary of proposals by House Speaker Nancy Pelosi (D-CA)—which became public via leaks from lobbyists, of course—provided an initial glimpse of the Democrat leadership’s policy approach. Party leaders claimed the leaked document describes an old legislative draft (they would say that, wouldn’t they?).

The Good: Realigning Incentives in Part D

Among other proposals, the Pelosi proposal would rearrange the current Part D prescription drug benefit, and “realign incentives to encourage more efficient management of drug spending.” Under current law, once beneficiaries pass through the Part D “doughnut hole” and into the Medicare catastrophic benefit, the federal government pays for 80 percent of beneficiaries’ costs, insurers pay for 15 percent, and beneficiaries pay for 5 percent.

This existing structure creates two problems. First, beneficiaries’ 5 percent exposure contains no limit, such that seniors with incredibly high drug spending could face out-of-pocket costs well into the thousands, or even tens of thousands, of dollars.

The Pelosi proposal follows on plans by MedPAC and others to restructure the Part D benefit. Most notably, the bill would institute an out-of-pocket spending limit for beneficiaries (the level of which the draft did not specify), while reducing the federal catastrophic subsidy to insurers from 80 percent to 20 percent. The former would provide more predictability to seniors, while the latter would reduce incentives for insurers to drive up overall drug spending by having seniors hit the catastrophic coverage threshold and thus can shift most of their costs to taxpayers.

The Bad: Price Controls

The Pelosi document talks about drug price “negotiation,” but the policy it proposes represents nothing of the sort. For the 250 largest brand-name drugs lacking two or more generic competitors, the secretary of Health and Human Services would “negotiate” prices. However, Pelosi’s bill “establishes an upper limit for the price reached in any negotiation as no more than” 120 percent of the average price in six countries—Australia, Canada, France, Germany, Japan, and the United Kingdom—making “negotiation” the de facto imposition of price controls.

Drug manufacturers who refuse to “negotiate” would “be assessed an excise tax equal to 75 percent of annual gross sales in the prior year,” what Pelosi’s office called a “steep, retroactive penalty creat[ing] a powerful financial incentive for drug manufacturers to negotiate and abide by the final price.” Additionally, the “negotiated” price would apply not just to Medicare, but would extend to other forms of coverage, including private health insurance.

But the solution to that dilemma lies in trade policy, or other solutions short of exporting other countries’ price controls to the United States, as outlined in both the Pelosi and Trump approaches. Price controls, whether through the “negotiation” provisions in the Pelosi bill, or related provisions that would require rebates for drugs that have increased at above-inflation rates since 2016, have brought unintended consequences whenever policy-makers attempted to implement them. In this case, price controls would likely lead to a significant slowdown in the development and introduction of new medical therapies.

The Ugly: New Government Spending

While the price controls in the drug pricing plan have attracted the most attention, Democrats have mooted some version of them for years. Price controls in a Democratic drug pricing bill seem unsurprising—but consider what else Democrats want to include:

With enough savings, H.R. 3 could also fund transformational improvements to Medicare that will cover more and cost less—potentially including Medicare coverage for vision, hearing, and dental, and many other vital health system needs.

In other words, Pelosi wants to take any potential savings from imposing drug price controls and use those funds to expand taxpayer-funded health care subsidies. In so doing, she would increase the fiscal obligations to a Medicare program that is already functionally insolvent, and relying solely on accounting gimmicks included in Obamacare to prevent shortfalls in current seniors’ benefits.

This post was originally published at The Federalist.

Three Obstacles to Senate Democrats’ Health Care Vision

If Democrats win a “clean sweep” in the 2020 elections—win back the White House and the Senate, while retaining control of the House—what will their health care vision look like? Surprisingly for those watching Democratic presidential debates, single payer does not feature prominently for some members of Congress—at least not explicitly, or immediately. But that doesn’t make the proposals any more plausible.

Ezra Klein at Vox spent some time talking with prominent Senate Democrats, to take their temperature on what they would do should the political trifecta provide them an opportunity to legislate in 2021. Apart from the typical “Voxplanations” in the article—really, did Klein have to make not one but two factual errors in his article’s first sentence?—the philosophy and policies the Senate Democrats laid out don’t stand up to serious scrutiny, on multiple levels.

Problem 1: Politics

The first problem comes in the form of a dilemma articulated by none other than Ezra Klein, just a few weeks ago. Just before the last Democratic debate in July, Klein wrote that liberals should not dismiss with a patronizing shrug Americans’ reluctance to give up their current health coverage:

If the private insurance market is such a nightmare, why is the public so loath to abandon it? Why have past reformers so often been punished for trying to take away what people have and replace it with something better?…

Risk aversion [in health policy] is real, and it’s dangerous. Health reformers don’t tiptoe around it because they wouldn’t prefer to imagine bigger, more ambitious plans. They tiptoe around it because they have seen its power to destroy even modest plans. There may be a better strategy than that. I hope there is. But it starts with taking the public’s fear of dramatic change seriously, not trying to deny its power.

Democrats’ “go big or go home” theory lies in direct contrast to the inherent unease Klein identified in the zeitgeist not four weeks ago.

Problem 2: Policy

Klein and the Senate Democrats attempt to square the circle by talking about choice and keeping a role for private insurance. The problem comes because at bottom, many if not most Democrats don’t truly believe in that principle. Their own statements belie their claims, and the policy Democrats end up crafting would doubtless follow suit.

Does this sound like someone who 1) would maintain private insurance, if she could get away with abolishing it, and 2) will write legislation that puts the private system on a truly level playing field with the government-run plan? If you believe either of those premises, I’ve got some land to sell you.

In my forthcoming book and elsewhere, I have outlined some of the inherent biases that Democratic proposals would give to government-run coverage over private insurance: Billions in taxpayer funding; a network of physicians and hospitals coerced into participating in government insurance, and paid far less than private insurance can pay medical providers; automatic enrollment into the government-run plan; and many more. Why else would the founder of the “public option” say that “it’s not a Trojan horse” for single payer—“it’s just right there!”

Problem 3: Process

Because Democrats will not have a 60-vote margin to overcome a Republican filibuster even if they retake the majority in 2020, Klein argues they can enact the bulk of their agenda through the budget reconciliation process. He claims that “if Democrats confine themselves to lowering the Medicare age, adding a [government-run plan], and negotiating drug prices, there’s reason to believe it might pass parliamentary muster.”

Of course Klein would say that—because he never worked in the Senate. It also appears he never read my primer on the Senate’s “Byrd rule,” which governs reconciliation procedures in the Senate. Had he done either, he probably wouldn’t have made that overly simplistic, and likely incorrect, statement.

Take negotiating drug prices. The Congressional Budget Office first stated in 2007—and reaffirmed this May—its opinion that on its own, allowing Medicare to negotiate drug prices would not lead to any additional savings.

That said, Democrats this year have introduced legislation with a “stick” designed to force drug companies to the “negotiating” table. Rep. Lloyd Doggett (D-Texas) introduced a bill (H.R. 1046) requiring federal officials to license the patents of companies that refuse to “negotiate” with Medicare.

While threatening to confiscate their patents might allow federal bureaucrats to coerce additional price concessions from drug companies, and thus scorable budgetary savings, the provisions of the Doggett bill bring their own procedural problems. Patents lie within the scope of the House and Senate Judiciary Committees, not the committees with jurisdiction over health care issues (Senate Finance, House Ways and Means, and House Energy and Commerce).

While Doggett tried to draft his bill to avoid touching those committees’ jurisdiction, he did not, and likely could not, avoid it entirely. For instance, language on lines 4-7 of page six of the Doggett bill allows drug companies whose patents get licensed to “seek recovery against the United States in the…Court of Federal Claims”—a clear reference to matter within the jurisdiction of the Judiciary Committees. If Democrats include this provision in a reconciliation bill, the parliamentarian almost certainly advise that this provision exceeds the scope of the health care committees, which could kill the reconciliation bill entirely.

But if Democrats don’t include a provision allowing drug manufacturers whose patents get licensed the opportunity to receive fair compensation, the drug companies would likely challenge the bill’s constitutionality. They would claim the drug “negotiation” language violates the Fifth Amendment’s prohibition on “takings,” and omitting the language to let them apply for just compensation in court would give them a much more compelling case. Therein lies the “darned if you do, darned if you don’t” dilemma reconciliation often presents: including provisions could kill the entire legislation, but excluding them could make portions of the legislation unworkable.

Remember: Republicans had to take stricter verification provisions out of their “repeal-and-replace” legislation in March 2017—as I had predicted—due to the “Byrd rule.” (The provisions went outside the scope of the committees of jurisdiction, and touched on Title II of the Social Security Act—both verboten under budget reconciliation.)

If Republicans had to give up on provisions designed to ensure illegal immigrants couldn’t receive taxpayer-funded insurance subsidies due to Senate procedure, Democrats similarly will have to give up provisions they care about should they use budget reconciliation for health care. While it’s premature to speculate, I wouldn’t count myself surprised if they have to give up on drug “negotiation” entirely.

1994 Redux?

Klein’s claims of a “consensus” aside, Democrats could face a reprise of their debacle in 1993-94—or, frankly, of Republicans’ efforts in 2017. During both health care debates, a lack of agreement among the majority party in Congress—single payer versus “managed competition” in 1993-94, and “repeal versus replace” in 2017—meant that each majority party ended up spinning its wheels.

To achieve “consensus” on health care, the left hand of the Democratic Party must banish the far-left hand. But even Democrats have admitted that the rhetoric in the presidential debates is having the opposite effect—which makes Klein’s talk of success in 2021 wishful thinking more than a realistic prediction.

This post was originally published at The Federalist.

What You Need to Know about President Trump’s Drug Pricing Plan

On Friday, President Trump gave a Rose Garden speech outlining his plan, entitled “America’s Patients First,” to combat rising drug prices. The plan incorporates policy ideas included in the president’s budget earlier this year, new proposals, and additional topics for discussion that could turn into more specific ideas in the future.

What’s the Problem?

Surveys suggest public frustration with the cost of prescription drugs. While such costs represent a small fraction of overall spending on health care, several dynamics help the prescription drug issue gain disproportionate attention. First, in any given year, more Americans incur drug costs than hospital costs. Whereas only 7.3 percent of Americans had an inpatient hospitalization in 2013, more than three in five (60.7 percent) had prescription drug expenses.

With more Americans incurring drug costs, and paying a larger percentage of drug costs directly from their pockets, the issue has taken on greater prominence. The rise of coinsurance (i.e., paying a percentage of drug costs, rather than having those costs capped at a set dollar amount) for pricey specialty drugs exacerbates this dynamic.

What Are the Proposed Solutions?

In general, ways to address drug prices fall into three large buckets.

Controlling costs through competition: These solutions would involve bringing down price levels by encouraging generic competition, or substituting one type of drug for another.

Shifting costs: These solutions would alter who pays for drugs among insurers, pharmaceutical benefit managers (PBMs), or consumers. While they may make drugs more “affordable” for consumers, they will not change overall spending levels. In fact, if done poorly, these types of proposals could actually increase overall spending, by encouraging individuals to increase their consumption of costly brand-name drugs.

Drug company and PBM stocks went up Friday following the blueprint’s release, largely because the plan eschews actions in the second bucket. The president’s plan includes a few tweaks to the system of “rebates” (de facto price controls) the Medicaid program uses, but includes none of the major Democratic proposals to use blunt government action to drive down prices.

In fact, the plan criticizes foreign price controls, attacking the “global freeloading” by which other countries gain the research and development benefits of the pharmaceutical industry without paying their “fair share” of those R&D costs. While the plan frequently mentions the disproportionate share of costs American consumers pay, it includes few specific proposals to rebalance these costs to other countries. It also remains unclear whether, if successfully implemented, any such rebalancing would successfully lower prices in the United States.

Other competitive proposals include giving Medicare Part D plans more flexibility to adjust their formularies mid-year to respond to changes in the generic drug marketplace, and prohibiting Part D plans from including “gag clauses.” These clauses prohibit pharmacies from telling consumers that they would actually save money by paying cash for certain drugs, rather than using their insurance.

In the cost-shifting bucket lie several of the proposals incorporated into the president’s budget. For instance, a cap on out-of-pocket expenses for the Medicare Part D prescription drug benefit would provide important relief to seniors with very high annual drug costs. However, to the extent that such a proposal would encourage seniors to over-consume drugs, or purchase more costly brand-name drugs, once they reach such a cap, this proposal could also increase overall Part D spending.

In a similar vein lie proposals about PBMs passing drug rebates directly to consumers at the point of sale. In most cases, PBMs had previously passed on those savings indirectly to insurers in the form of lower premiums. Giving rebates directly to consumers—a practice some insurers have begun to adopt—would provide relief to those with high out-of-pocket costs, but could raise premiums overall, particularly for those with relatively low prescription spending.

What’s Next?

The plan raises more questions than it answers—quite literally. The last and longest section of the blueprint includes 136 separate questions about how the administration should structure and implement some of the proposals discussed in the document.

Some proposals, while eye-catching, seem ill-advised. For instance, the proposal to “evaluate the inclusion of list prices in direct-to-consumer advertising” raises potential First Amendment concerns—government dictating the content of drugmakers’ communications with patients. Moreover, with many Americans viewing health care as a superior good, some consumers may view a more expensive product as “better” than its alternative. In that case this proposal, if ever implemented, could have the opposite of its intended effect, encouraging people to consume more expensive drugs.

The plan did not include the heavy-handed approaches to the prescription drug issue—Medicare price “negotiation” and drug reimportation—that Democrats favor, and that President Trump endorsed in his 2016 campaign. The document also makes clear the iterative nature of the process, with additional proposals likely coming after feedback from industry and others.

But to the extent that Washington has become consumed by the midterm elections fewer than six months away, the high-profile event Friday allowed Republicans and the president to say they have a plan to bring down drug prices—an important political objective in and of itself.

This post was originally published at The Federalist.

Just the Facts on Drug Negotiation

Congressional hearings often serve as elaborate theatrical productions. Members ask pre-written questions, receive formulaic answers, and in many cases use witnesses as props to engage in rhetorical grandstanding. The grandstanding element was on full display Tuesday during the confirmation hearing for Alex Azar, the Health and Human Services Secretary-designee. Sen. Claire McCaskill (D-MO) wanted to beat up on “evil” drug companies, and she wasn’t going to let facts get in her way.

McCaskill spent two minutes attacking pharmaceutical advertisements, including a reference to “the one for erectile dysfunction where they have them in two bathtubs,” before she tackled the issue of Medicare “negotiating” prices with drug companies. At this point she demonstrated ignorance on several issues.

Second, McCaskill failed to grasp that Medicare drug plans already negotiate with pharmaceutical companies, and that the discounts they obtain have helped keep overall premiums for the prescription drug Part D plan low. It may sound radical to McCaskill, who has spent practically her entire adult life working in government, but the private sector can negotiate just like the government, and probably do so more effectively than a government entity.

Third, McCaskill refused to believe that getting the government involved in “negotiating” drug prices would not save money. When Azar explained that removing a provision prohibiting federal bureaucrats from “negotiating” prices wouldn’t save money, McCaskill called his explanation “just crazy” and “nuts.”

It isn’t nuts, it’s economics. Even though McCaskill tried to lecture Azar on economics and markets at the beginning of her questioning, her queries themselves showed very little understanding of either concept. In a negotiation, the ability to drive a hard bargain ultimately derives from the ability to seek out other options. If Medicare must cover all or most prescription drugs, such that it can’t walk away from the proverbial bargaining table, it will by definition be limited in its ability to put downward pressure on prices.

But don’t take my word for it. As Azar pointed out to McCaskill, none other than Peter Orszag, who directed the Office of Management and Budget (OMB) under President Obama — said as much in an April 2007 Congressional Budget Office letter:

By itself, giving the Secretary broad authority to negotiate drug prices would not provide the leverage necessary to generate lower prices than those obtained by PDPs and thus would have a negligible effect on Medicare drug spending. Negotiation is likely to be effective only if it is accompanied by some source of pressure on drug manufacturers to secure price concessions. The authority to establish a formulary, set prices administratively, or take other regulatory actions against firms failing to offer price reductions could give the Secretary the ability to obtain significant discounts in negotiations with drug manufacturers.

Only the ability to limit access to drugs by setting a formulary or imposing  administrative prices, i.e. “negotiating” by dictating prices to drug companies, would have any meaningful impact on pricing levels. But this truth proved inconvenient to McCaskill, who admitted she “refuse[d] to acknowledge it.”

Instead, McCaskill continued haranguing him about the evils of drug companies. She pointed out that one congressman who helped negotiate the prescription drug benefit, Rep. Billy Tauzin (R-LA), “went to run PhRMA after he finished getting it through.”

Indeed he did. And as the head of PhRMA, he bragged about the “rock-solid deal” he cut with the Obama administration to help his industry. Big Pharma’s “deal” as part of Obamacare encouraged seniors to purchase costlier brand-name drugs instead of cheaper generics, which the CBO concluded would raise Part D premiums by nearly 10 percent. And who voted for that “rock-solid deal?” None other than Claire McCaskill.

As the old saying goes: If you have the facts on your side, pound the facts. But if you don’t, pound the table.

The facts indicate that McCaskill voted for a “rock-solid deal” with Big Pharma that raised premiums on millions of seniors, which actually makes her part of the problem, not part of the solution. Of course, that also makes her willingness to grandstand at Tuesday’s hearing, and her unwillingness to face facts she now finds politically inconvenient, less “crazy” than it first seemed.

This post was originally published at The Federalist.

Pelosi Sides with George Soros over Low-Income Seniors

The Hill reported that, at her press conference earlier this week, House Democrat Leader Pelosi rejected many of the pay-fors in the House-passed payroll tax measure: “We’re not going to give to the middle class with one hand and take from them with another by saying, ‘You’re going to get the tax cut, but seniors are going to have to pay more for Medicare, or whatever.’”

Where to begin with this statement?  For one, the House-passed Medicare proposals have NOTHING to do with making the middle class “pay more for Medicare.”  The ONLY increase in beneficiary cost-sharing in the House-passed bill makes wealthy seniors like George Soros and Warren Buffett pay more for their Medicare benefits.  And it’s such a “radical” proposal that it comes straight from the mind of…Barack Obama, who included it in his September deficit submission to Congress.

Meanwhile, the Hill continued that the former Speaker “Pelosi offered several alternatives for offsetting the tax package, including a provision to… allow Medicare to negotiate prescription drug prices on behalf of millions of seniors in the program…”  However, the Congressional Budget Office has consistently indicated that the only way to achieve savings through drug “negotiation” is by restricting access to therapies for seniors.  To use but one example, in April 2007 CBO concluded that drug “negotiation is likely to be effective only if it is accompanied by some source of pressure on drug manufacturers to secure price concessions.  The authority to establish a formulary, set prices administratively, or take other regulatory actions against firms failing to offer price reductions could give the Secretary the ability to obtain significant discounts in negotiations with drug manufacturers.”

To sum up:  Nancy Pelosi would rather cut access to seniors’ prescription drugs through new government-imposed restrictions than to force George Soros to pay more for his taxpayer-subsidized health care.  And Democrats say they stand with the middle-class how…?

The Myth of “Market Power”

The Center for Budget and Policy Priorities released a preliminary analysis of the Ryan-Wyden Medicare proposal late last week, and (unsurprisingly) outlined reasons to oppose it.  But included in their brief was an interesting line: “Ryan-Wyden would deny Medicare much of its ability to serve as a leader in controlling costs by depriving it of the considerable market power it secures from its large enrollment.”  The “market power” argument is one liberals toss around frequently, claiming Medicare can use its power to get “better bargains.”

But there’s one easy question that exposes the fallacy of this liberal argument.  If anyone tries to talk about preserving or expanding Medicare’s “market power,” ask them this: Would you have any objections if drug companies, or major hospitals, decided to drop out of the Medicare program, or all government-run programs?  Recent experience suggests that Democrats will NOT allow providers to drop out of government-run programs – in Massachusetts, Gov. Deval Patrick proposed “solving” the problem of physician access by forcing doctors to participate in government-organized insurance plans as a condition of licensure.  That’s NOT a market – that’s government coercion.  And “leveraging market power” is just a euphemism by the left for the government dictating prices to medical providers.

Liberals’ incoherence on “market power” is actually quite stunning:

  • Zeke Emanuel wrote a New York Times opinion piece yesterday on premium support (about which more soon) stating that when it comes to Medicare, “We Must Cut Costs, Not Shift Them.”  The only problem with his logic is that one 2008 study found that Medicare and other government-run programs ALREADY shift costs from the public sector to the private sector – to the tune of nearly $1,800 per family per year.
  • Ezra Klein last week alleged that Medicare Advantage compete against government-run Medicare, apparently unaware that the structure of the Medicare Advantage program means plans actually compete against themselves, and have ZERO incentive to compete against government-run Medicare on price.
  • Then there’s Paul Krugman, who says that “Patients Are Not Consumers.”  Well, if patients are not consumers, then how can there be a “market” for Medicare to exercise its “power” over?  The only other potential “buyers” under Krugman’s logic are government bureaucrats – and does anyone think some government officials sitting in Washington offices constitute a “market” in any realistic sense of the word?

The fact of the matter is, many conservatives believe that there is certainly NOT a market in health care – or not enough of one anyway – and that comprehensive entitlement reform should look to change that fact.  And their rhetoric notwithstanding, the policy positions of most liberals prove that their talk about increasing “market power” is really just an excuse for government to increase its dominance over everything in its path.

Democrats’ Hypocrisy on Cutting Medicare Benefits

The Hill reports this afternoon that several dozen Democrats sent a letter asking the supercommittee “to allow Medicare to negotiate prices for prescription drugs.”  The article goes on to cite a report from House Democrats claiming that “price negotiations could save the government $156 billion over 10 years.”  However, the Congressional Budget Office has previously – and repeatedly – indicated that the only way to achieve savings through drug “negotiation” is by restricting access to therapies for seniors.

For instance, in January 2007 CBO said that “without the authority to establish a formulary, we believe that the Secretary would…lack the leverage to obtain significant discounts in [her] negotiations with drug manufacturers.”  And in April 2007 CBO similarly concluded that drug “negotiation is likely to be effective only if it is accompanied by some source of pressure on drug manufacturers to secure price concessions.  The authority to establish a formulary, set prices administratively, or take other regulatory actions against firms failing to offer price reductions could give the Secretary the ability to obtain significant discounts in negotiations with drug manufacturers.”  In other words, the only way to achieve the $156 billion in savings Democrats claim would come from “negotiation” would be to impose harsh restrictions on seniors’ ability to access prescription drug therapies.

Given all this, some may find it a bit rich that Democrats are also criticizing those who discuss “cutting Medicare benefits” – because that’s exactly what their proposal for $156 billion in “savings” from drug “negotiation” would do.  As has been previously reported in this space, Medicare faces MAJOR structural problems – its budget deficit is larger than Greece’s, and the President’s own chief of staff admitted that the program “will run out of money in five years if we don’t do something.”  Solving these entitlement problems requires a real commitment to solutions, not the false promise that the program’s problems can be painlessly waved away through political sloganeering.

Democrat Plans Rationing with Open Eyes

From Montana this week comes word that its Governor, Brian Schweitzer, wants to establish a government-run health care plan in his state.  The governor said he “has completely different plans for the Medicare and Medicaid money the federal government gives the state,” and that he wants to “create a state-run system that borrows from the program used in Saskatchewan.”  He then went on to explain how his government-run system might keep taxpayer spending on health care low:

[Schweitzer] said the Canadian province [i.e., Saskatchewan] controls cost by negotiating drug prices and limiting non-emergency procedures such as MRIs.

A simple web search about waiting times in Saskatchewan yields information about the types of “non-emergency procedures” subject to rationing in the province; for instance, the list of “Wait List FAQs” from the Saskatchewan Cancer Agency includes this helpful guidance for cancer patients:

What are you doing to ensure that I get an appointment in a timely way?

Currently we have a shortage of medical oncologists that is impacting our wait times.  We are also actively recruiting to fill our vacant positions throughout our facilities and are working to bring in locums to help address wait times….

Can I get care sooner if I go somewhere else?

You will find that wait times exist in the healthcare system throughout Canada and in other countries as well….

And when it comes to the MRI example Governor Schweitzer referenced, rationing occurs there as well – unless you’re politically connected.  Saskatchewan Rough Riders – i.e., players in the Canadian Football League – have been able to jump the long queues for MRIs in the province by paying for their own treatment; other people can wait for as long as three months.

Details on how Governor Schweitzer intends to turn Montana into a Canadian-style health care system are not yet known.  However, given that Schweitzer’s application will be reviewed by the Centers for Medicare and Medicaid Services – whose head, Donald Berwick, has spoken of rationing with our eyes open – it’s quite possible the application will be approved.  In that scenario, those who can afford to get to the head of the queue – millionaires and billionaires who can fund the entire cost of their treatment, and pro athletes like Michael Vick – will receive in a prompt fashion the MRIs and cancer care they need to maintain or regain their health.  Everyone else, perhaps not.

Fact Checking Nancy Pelosi on…Everything

Former House Speaker Nancy Pelosi appeared on Face the Nation yesterday, and made several allegations regarding Medicare that warrant rebuttal:

CLAIM:  “I could never support any arrangement that reduces benefits from Medicare.”

FACT:  The status quo WILL reduce benefits in Medicare, when the paper IOUs in the Medicare trust fund are exhausted in as few as nine years, leaving the program short of funds to pay its bills.  While Pelosi claims to oppose cutting Medicare benefits, if we do nothing, those benefits to seniors will automatically be reduced.

CLAIM:  “We in our health care bill…saved half a trillion dollars in Medicare.  We had half a trillion dollars in savings there which…we made it [the Medicare trust fund] stable for about ten years…added ten years of solvency into the future.”

FACT:  The Medicare actuary has previously written that the Medicare provisions in the law “cannot be simultaneously used to finance other Federal outlays (such as the coverage expansions under the PPACA) and to extend the [Medicare] trust fund, despite the appearance of this result from the respective accounting conventions.”  If Pelosi wants to use the Medicare savings provisions to extend the life of the Medicare trust fund – and not to fund the new entitlements created by the law – the Congressional Budget Office previously estimated what the fiscal impact would be:  “A net increase in federal deficits of $260 billion” through 2019.

CLAIM:  “I think that we can…give the secretary of HHS the power to renegotiate for lower prices.  That would save billions and billions and billions of dollars….If you’re talking about reducing the benefits, that’s a non-starter.”

FACT:  The Congressional Budget Office has previously asserted that giving HHS such a power to negotiate drug prices “would have a negligible effect on federal spending….Without the authority to establish a [drug] formulary, we believe that the Secretary [of HHS]…would lack the leverage to obtain significant discounts in [her] negotiations with drug manufacturers.”  The only way for the federal government to save “billions and billions and billions of dollars” through drug negotiation, as Pelosi claims, would be to establish a formulary that prohibits Medicare from covering certain prescription drugs – in other words, by cutting Medicare benefits.

While former Speaker Pelosi says she doesn’t want to reduce Medicare benefits to seniors, doing nothing would result in seniors losing Medicare benefits – as would her one proposed “solution” involving prescription drug negotiation.  These comments perfectly illustrate how Democrats’ “Mediscare” arguments fail – and why Congress needs to develop a true long-term solution to America’s entitlement crisis.