With the debt ceiling showdown approaching, Republicans insist on spending cuts in exchange for raising the country's borrowing limit. President Obama says the debt ceiling shouldn't be used as a negotiating tool. But it's inevitable that additional cuts will be seriously considered. And, unfortunately, lawmakers are likely to take aim at Medicare Part D, the successful prescription drug benefit.
This approach is misguided. Cuts to Medicare Part D would have devastating consequences for seniors and taxpayers.
Created in 2006, Medicare Part D has helped ensure that America's seniors have access to prescription drugs. Today, nearly 47 million Americans are Part D eligible. The program was built to rely on market mechanisms. Under Part D, seniors choose from a wide variety of coverage plans. With so many insurers competing for seniors' business, they have a strong incentive to keep costs low and benefits generous. This fierce competition has kept expenses down for seniors and taxpayers. Overall, Part D has cost 43 percent less than original estimates predicted — practically unheard of for a government program.
Part D monthly premiums will again average just $30 in 2013, according to officials at the Department of Health and Human Services. Part D rates are even more impressive when compared with the overall health insurance market. The typical premium for an employer-sponsored family health plan rose 4 percent from 2011 to 2012 and 9 percent the year before.
Still, many Democrats are willing to compromise this program. Their proposal would require drug companies to pay a so-called “rebate” to the government for every medication sold to a Medicare Part D participant who also qualifies for Medicaid, the government health program for the poor. The Obama administration believes this plan will save billions. But it could actually drive up costs for most Medicare beneficiaries.
Just look at what's already happening in our Medicaid program. Drug companies are required by law to sell their wares to Medicaid at below-market prices; consequently, they've been forced to raise prices elsewhere. In other words, the proposed Part D rebate program would effectively levy a new tax on every senior who isn't eligible for Medicaid. Indeed, two independent studies have estimated that the rebate plan will raise premiums for traditional Medicare enrollees by 20 to 50 percent.
Higher premiums are a big concern for most Part D beneficiaries. According to the Medicare Today poll, 84 percent of enrollees were worried that a Part D restructuring would increase their out-of-pocket drug costs, while 53 percent were afraid it would cause them to cut back or stop taking their medicines altogether.
Government health programs are still in serious need of comprehensive reform. Unfortunately, the president continues to attack the very part of the system that's most financially sound. Changes to Medicare Part D will raise only minimal revenue — and at the expense of America's seniors.
Pitts is president of the Center for Medicine in the Public Interest.