Obama administration in denial on Part D

After the Affordable Care Act’s disastrous rollout, the Obama administration might well have learned that excessive bureaucratic meddling in the design of health plans will not be well received by the American people.

But instead, the agency that runs the Medicare program -- the Centers for Medicare and Medicaid Services (CMS) -- is doubling down. CMS proposed a rule in January that would dramatically change the way Medicare’s prescription drug benefit program will operate.

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CMS has unleashed a battery of new bureaucratic rules that will drive up the costs of Part D, force drug plans to drop out, establish performance measures designed to satisfy Washington bureaucrats, and ultimately leave seniors with fewer choices and higher costs.

President Obama’s misgivings about Medicare Part D are well-known. In 2006, then Sen. Obama derided the new prescription drug program, saying it “somehow managed to combine the worst aspects of the public and private sectors -- price gouging and bureaucratic confusion, gaps in coverage, and eye-popping bill for taxpayers.”

He couldn't have been more wrong. Part D provides much-needed prescription drug coverage for seniors at costs far lower than estimated, is highly popular with seniors, and is costing taxpayers much less than originally estimated. 

Part D it owes its impressive results to its market-based structure. The program allows seniors to choose from a wide variety of private drug benefit plans that are genuinely competing on price and design. The government minimizes bureaucratic intrusion – setting the basic parameters and providing seniors with information and premium subsidies.

It is precisely this hands-off approach that has made Part D such a success. More than 1,110 Part D plans are offered across the country, giving any one senior about three dozen plans from which to choose. These choices enable seniors to hone in on plans that provide them the medicines they need at the best value.

Competition forces insurers to keep premiums down and quality up, in part by negotiating discounts with drug companies. Costs for seniors have remained surprisingly stable, with average monthly premiums increasing by just $5 in the last five years, now $39.90 a month for the average senior, up from $35.09 in 2009.

The only thing eye-popping about Part D’s cost to taxpayers is the savings. While every other federal health program has seen costs explode, spending on Part D is 45 percent below the government’s initial forecast. In each of the past three years, the Congressional Budget Office (CBO) has lowered the program’s 10-year cost projections by more than $100 billion.

By providing better access to prescription drugs, Part D helps keep seniors out of the hospitalso it also saves money in other parts of Medicare. In fact, the CBO now takes Part D savings into account when making overall Medicare cost projections.

And yet, the regulations issued by the Obama administration would seriously undermine the market mechanisms behind Part D’s success and involve the government much more deeply in micromanaging the program.

The new rules would allow the government to intervene in private contract negotiations and restrict plan options. Insurers could bid to offer only two plans -- one basic and one enhanced -- in each region, limiting choices for seniors.

In addition, the proposed rule would restrict access to drugs currently granted “protected class” status under Part D. Today, every Part D benefit plan must cover six classes of drugs, including anti-depressants, antipsychotic medications, and immunosuppressants that are vital to organ transplant patients. 

The Obama administration claims revising the “protected class” designation will save money. But it is certain to drive up costs in other parts of the program if people are not getting the specific drugs that work for them and wind up in the hospital. 

The restriction is both harmful and unnecessary: Cheaper generic versions of these medicines are readily available. Of the 400 most commonly prescribed Part D medicines, just 15 are protected brand drugs. A full 83 percent of all antidepressants are generic. Prices for protected-class medications actually dropped by 2 percent during Part D’s first four years. 

Instead of cutting costs, the proposal would erode the robust landscape of coverage options available to seniors and make it harder to access needed treatments.

It’s no secret that the president and his fellow Democrats have never cared for Medicare Part D. But now that it has proven to be an indisputable success, they should look at their own track record and toss these rules that could destroy a successful program.

Turner is the president of the Galen Institute.