op-ed

Medicare Part D Changes Deserve A Big, Fat F

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Jared Whitley Contributor
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There has been more than a touch of satisfaction for former George W. Bush Administration appointees, such as myself, to see how reasonable our ex-president has become to those who — for eight years — cursed his name, called him horrible things and made fun of the way he talks.

And I don’t just mean the way Bush’s kneejerk critics now acknowledge how graceful he was in the face of constant criticism or how gentle he was toward those who denounced, lied about and even betrayed him. He certainly won a lot of points from former critics last year when he said that a free press was “indispensable to democracy.”

(Though note, his remarks were aimed at Vladimir Putin, not Donald Trump).

But beyond that, Bush’s signature programs have left lasting impacts. No Child Left Behind has improved student outcomes in reading and math, helped close the achievement gap, and improved graduation rates. His free trade policy has enriched both the United States and our trading partners. And Medicare Part D has fulfilled its promise of keeping seniors healthier (and saving taxpayer money) through a free-market prescription drug benefit.

That last one has been, in my mind, the most impressive. Under Part D, private insurance plans compete with one another for Medicare enrollees.  Seniors are empowered to choose among plans based on the drugs they cover, cost of co-pays, and monthly premiums. Unlike with many entitlement programs, where near or perfect monopolies may create a perverse disincentive to overcharge, Part D motivates insurance companies keep their plan costs low and drive for bargains with drug manufacturers.

This focus on preventive care, with seniors getting the right prescriptions, also saves the government money in the long run because seniors avoid worse problems down the line – because they are healthier. To help phase out the so-called donut hole for many seniors, in 2010 drug manufacturers agreed to cover 50 percent of the cost of drugs, with the insurance companies and seniors splitting the rest.

Consumer satisfaction has been very high (89 percent!) and costs have been much lower than projected.

It’s been a win-win-win.

But.

Under a current budget proposal, the well-run dynamics of Part D could be thrown out of whack. The generous 50 percent share that manufacturers were paying has been raised to an astonishing 70 percent, cutting out virtually the entire amount that insurance companies were paying. (The American Action Forum details the math of this extremely well here.)

While a big win for insurance companies, the deal is massively unfair to the drug manufacturers who were already absorbing much of the cost of drugs for seniors in the donut hole. Moreover, this deal disrupts the entire incentive program upon which Part D was built: insurance companies don’t need to control costs for those in the donut hole because those companies no longer have any skin in the game.

The free-market philosophy that has made Part D so successful is thrown out – at which point it’s just another entitlement subject to abuse and overspending.

This midnight Part D change should alarm conservatives on Capitol Hill and elsewhere. This goes well beyond the question of who’s paying for these drugs: the way Part D harnesses the power of the free market through consumer choice and competition should be the model for the broader government reform conservatives have been espousing for decades.

It is a successful role model that we must apply to other government programs.

Big-government leftists have grumbled in the face of Part D’s effectiveness — the way they have all the good economic news under Trump’s first year — and want to see it fail. This new deal could give them just that, undermining a terrific, free market-based program that’s helped millions of seniors for more than 10 years.

Congress can fix this problem before it goes into law by reducing the 70 percent share manufacturers must bear, returning financial responsibility to the plans, and making sure any reform reduces costs to the seniors Medicare is supposed to serve.

Drug companies, like oil companies, make for easy targets by lazy members of the news and entertainment media because they’re “too” profitable. But those profits serve as an incentive to make better drugs to heal more people. For insurance companies, you can’t really say the same thing. Somehow, they managed to make out like bandits under Obamacare, and here they are again profiting at the expense of the industry that does the actual healing.

There are plenty of programs in Washington that needs fixing. Medicare Part D isn’t one of them. It deserves an A.

Jared Whitley is political veteran with 15 years of experience in media and Washington politics. He has served as press liaison for Sen. Orrin Hatch (R-Utah) and associate director in the White House under George W. Bush. He is also an award-winning writer.


The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.