Medicare Part D: Market-Facing And Overwhelmingly Successful

Neil Siefring Vice President, Hilltop Advocacy
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The Medicare Part D program was passed by a Republican House and Senate and signed to law by President George W. Bush in 2003. It was instituted to help senior citizens buy medicine. It is voluntary, market-facing, and the best possible way to get medicine to seniors in the current political and policy environment. The companies helping to make needed drugs available to those over 65 who need them should not be punished for their success with a penalty camouflaged as a rebate to bureaucrats.

As of last year, 41 million Americans were enrolled in Medicare Part D. It gives seniors choice among different drug plans, has helped participants save approximately $7 billion, and the costs of the program are below projections. Nine out of ten participants in Medicare Part D are “satisfied with their drug coverage.” If Part D coverage did not exist, “62 percent of those over-65 would be more likely to ‘cut back or stop taking my medicine’ if not for Part D coverage.” During a hearing on the successes of the Part D program in the House, then-Rep. Joseph Pitts observed that “the program has worked so well because it forces prescription drug plans and providers to compete for Medicare beneficiaries–putting seniors, not Washington, in the driver’s seat.”

A key component of the success of the program has been the participation of the country’s drug companies. The free market element of the Part D program was jeopardized by President Barack Obama in his 2017 budget. He proposed forcing

pharmaceutical companies to “rebate” up to 40 percent of their drug sales back to Medicare, making Medicare Part D more similar to its traditional Medicaid counterparts. Forcing this rebate on drug makers would force them to sell their products to insurance companies at a loss, which would in turn lead to much higher prices for all other consumers.

It is hardly a surprise that President Obama offered this idea. With his ambivalence towards capitalism and penchant for the notion that bureaucrats know best, he would naturally want to undermine a productive and popular program that relies heavily on the free market.

It is a surprise that that the current Republican administration would consider siding with a community organizer over common sense. It was reported in a piece by the editors at Bloomberg that they have floated the idea of requiring rebates “if not for all Medicare beneficiaries, at least for low-income ones.” While it is understandable that this idea would be attractive as a way to drive revenue to the federal government for other funding priorities, it should not be pursued. The view of the editors at Bloomberg should be rejected.

As the Heritage Foundation noted in a report, requiring rebates from drug manufacturers would amount to a tax which would result in higher premiums, perhaps as high as “between 20 and 40 percent.” The report went on to explain that rebates would destroy “the market-based design that has made the Part D program so successful.” Finally, the Heritage Foundation made clear that rebates would indeed be “government price controls,” that would insert the federal government “between private insurers and drug manufacturers.” The editors at Bloomberg acknowledged that requiring rebates could result in higher drug prices and reduced funding for them to research and develop new drugs. That is far too great a risk to take with the health of seniors in order to bolster central planning.

The editors at Bloomberg suggested doubling down on socialism by empowering the already too powerful Department of Health and Human Services by allowing it to “negotiate on behalf of the 41 million people enrolled in Medicare’s Part D prescription drug plan. That kind of purchasing power — accompanied by the right not to cover a drug it deems too expensive — would give the department great leverage.” It would also give them great power over the medical decisions that seniors need to be making for themselves. The way to get needed pharmaceuticals to those who need it should not involve more government control. It should emphasize consumer choice and the free market.

Reforms to federal spending, entitlements, and the government’s role in health care are necessary. They should begin with large number of failing government programs and not with one that is working well and free market facing. Seniors should be able to keep getting the drugs they need under a program that works. And the free market actors providing the drugs for the program should not be forced to pay money to the federal government in the form of taxes disguised as rebates. Medicare Part D has been overwhelming successful. The message to the massive amount of seniors happy with Part D from Capitol Hill and Pennsylvania Avenue should be clear: if you like your plan, you can keep your plan.

Neil Siefring is vice president of Hilltop Advocacy, LLC, and a former Republican House staffer.  Follow him on Twitter @NeilSiefring