As Mitt Romney is fond of pointing out, the upcoming election is about choices. On very few issues is the choice more distinct than on Medicare. President Obama’s Medicare plan is little more than benefit cuts for current seniors and certain Medicare bankruptcy for future retirees. The Romney-Ryan plan envisions no Medicare changes for current or near-retirees, and a reformed system for younger workers based on choice and competition.
President Obama has made it clear that he wants to cut Medicare benefits for current seniors. That’s why his healthcare law created an unelected panel known as “IPAB” whose sole job is to cut Medicare payments to hospitals and doctors, leading to real cuts in healthcare services for current seniors.
In addition to the steep provider cuts already provided for in Obamacare, the Obama administration wants to impose price controls on the medicines that seniors need to manage and cure illnesses. The Medicare prescription drug program (known as “Medicare Part D” in Washington, D.C.) provides robust competition among drug companies in order to get the best deal possible for seniors. Unlike the rest of Medicare (where competition is nowhere to be found), Part D is coming in under cost for taxpayers. Since the program started nearly a decade ago, costs have been 40 percent lower than initially anticipated. Satisfaction rates for seniors are around 90 percent. The rest of the Medicare program is headed toward bankruptcy, with Part D the only model of success to point to.
This competition has worked, which is why Part D (and the broader Medicare Advantage program) became the model for the Romney-Ryan Medicare reform plan for younger workers. This “premium support” plan has its origins not in a libertarian fantasyland, but in frank negotiations between Congressman Ryan and two lifelong liberal Democrats: former Clinton OMB Director Alice Rivlin and Oregon Democratic Senator Ron Wyden. The bipartisan roots of this “competition benefits everyone” concept go even deeper, to President Clinton’s Medicare reform commission, co-chaired by former Louisiana Democratic Senator John Breaux.
But the Obama administration and congressional Democrats want all of this to end. They want to impose price controls on prescription medicines by ordering drug companies to “rebate” some of the money they receive for some seniors’ medicines back to the federal government. In addition, Democrats in Washington want to have the federal government “negotiate” (read: dictate prices) to drug companies for seniors’ medicines. Together, these policies would result in top-down price controls coming out of Washington. The results would be disastrous for today’s seniors.
Basic economics tells us what happens when the government tries to impose price controls: scarcity. A person or company cannot, at the end of the day, be compelled to lose money. They will simply stop providing the good or service to the marketplace. The same effect will happen with the Beltway Democrats’ plan for Medicare — price controls on prescription medicines for seniors will directly lead to less availability of life-saving drugs for these seniors. It’s as sure as the sun rising in the East.
Even liberal economists know this, so why are they pursuing this price control strategy, especially since it opens them up to legitimate criticism that they are cutting Medicare benefits for current seniors? It’s because they want to destroy the one area of Medicare that happens to be working (Part D), and which happens to be the only area that somewhat resembles a free market. They hope that by destroying this segment of Medicare, they will stop the rest of the program from looking so bad by comparison.
Liberals also know that Medicare Part D is a living, working model of more comprehensive Medicare reform for younger workers, tomorrow’s seniors. If they eradicate this service for today’s Medicare recipients, there won’t be a template of success that Medicare reformers like Paul Ryan, Ron Wyden, Alice Rivlin, and John Breaux can point to. Put simply, it’s downright embarrassing to have a well-functioning part of Medicare existing alongside the hulking failure that the traditional Medicare system has become for younger workers.
The Romney/Ryan plan is much better for today’s seniors. First, it plans on no cuts whatsoever to any services. Second, it restores to Medicare the over $700 billion cut from that program to pay for Obamacare. Finally, it won’t impose any new price control regimes on seniors’ medicines. Their solutions focus on expanding choice and competition for tomorrow’s seniors (saving Medicare and avoiding a massive taxpayer bailout in the process), not cutting benefits for today’s retirees.
Grover Norquist is president of Americans for Tax Reform. His Twitter handle is @GroverNorquist