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Medicare drug discount cards will be future disaster for Republicans

Medicare drug discount cards will be future disaster for Republicans
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Donald TrumpDonald John TrumpUSAID administrator tests positive for COVID-19 Kamala Harris, Stacey Abrams among nominees for Time magazine's 2020 Person of the Year DOJ appeals ruling preventing it from replacing Trump in E. Jean Carroll defamation lawsuit MORE is eager to show voters that he can lower prescription drug costs, but he is running out of time. Drug companies refused a demand to send $100 cash cards to seniors in time for the election, so the president declared that Medicare would instead send out $200 cash cards. That is a trick that is likely to backfire on Republicans down the road.

Drug manufacturers were ready to make a deal with the White House to avoid federal price controls. They evidently offered to spend $150 billion to reduce what consumers pay out of pocket for medicines. In return, the administration would not impose “most favored nation” prices based on much lower prices paid by countries in Europe. The deal collapsed when drug manufacturers refused the demand to send cash cards.

The reaction was swift, as the president signed an executive order to enact “most favored nation” prices. But any cost cuts from that policy would not take effect until next year at the earliest. With the election, a fast solution is necessary, so the president declared that Medicare will send discount cards to more than 30 million seniors enrolled in Part D plans who do not already receive the low income subsidy. That might show the president can deliver his promise to lower drug costs.

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This plan could take effect, as unlikely as it seems, on the timeline of the White House. Medicare has broad authority with demonstration projects to test new payment methods that could cut program cost. For this case, the new subsidy reduces out of pocket prices that prevent some seniors from filling all their prescriptions. Better adherence may reduce the need for other treatments, potentially yielding Medicare savings.

Distributing the cards would be left to Part D plans. Despite the appealing image offered by the president of seniors receiving cash cards in the mail, it is likely that Part D plans will credit eligible enrollees with $200 to help reduce cost sharing amounts as prescriptions are filled. Even if the cash cards were delayed, the credit could still be used by November.

If this proposal is enacted, Medicare spending would increase by more than $6 billion this year with the money taken from the Part D trust fund. By Medicare standards, that is not significant, as Part D is a $100 billion program, projected to increase by $13 billion next year. The new subsidy is half that increase and not a fiscal threat to the program.

Arguably, the administration does have legal authority for a demonstration project involving drug discount cards. Implementation challenges appear to be minor. That is not enough to justify a project that is unlikely to yield insights to improve Part D. Moreover, it opens the door to future abuses of demonstration authority by a president for political ends.

The administration cannot credibly claim that this proposal is a research project. Seniors can select from a wide variety of Part D plans rather than one standard benefit package. Further, how a $200 subsidy would affect consumer behavior depends on the drug formulary and cost sharing rules of the plans, among other factors. Strong research would have to account for this variation. However, Medicare will be pushed to distribute the cash cards fast, before a research design could be set in motion.

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That probably does not matter. There is little chance that a $200 subsidy would have an effect on medication adherence. Some beneficiaries will fill a prescription that they might otherwise have skipped. Most will view the subsidy as a windfall that will not permanently improve adherence, while the extra money, even if sent every year, would not resolve other barriers to adherence, such as patient trust that the treatment is effective.

The real effect of this would be on the integrity of research and potential misuse of dollars in Medicare. The last administration went down this road with the Affordable Care Act, raising the ability of the executive branch to change health policy. Demonstration projects that test significant policy changes in Medicare with success can be enacted by the Department of Health and Human Services without any legislation from Congress. If the policy on drug discount cards is enacted, it would stretch this authority to the limit. It would set a standard that Republicans live to regret.

Joseph Antos is a former government official and the Wilson Taylor scholar in health care and retirement policy with the American Enterprise Institute.