Skip to content

Medicare Drug Plan Ought to Be Model for Health Reform

As they work on comprehensive health reform, Congress and President Barack Obama ought to look to the most successful model yet: the 2003 Medicare prescription drug law.

[IMGCAP(1)]Passed amid rancor and predictions of catastrophe, the law has proved to be an enormous success — much cheaper than expected and overwhelmingly popular with seniors.

The problem for liberal Democrats is ideology. The Medicare Part D program is based on competition among private insurance plans, whereas they are determined to model health reform on government-run, price-controlled Medicare Parts A and B or on Massachusetts’ individual-mandate plan.

But, as the latest Medicare trustees report warned, Medicare’s hospital insurance plan (Part A) is scheduled to go bankrupt in 2017. And Part B, which pays doctor bills, is experiencing “steep cost increases— for taxpayers and will demand “unusually large premium increases— for seniors who can afford to pay.

Meanwhile, Massachusetts’ heavily regulated plan, while covering 355,000 previously uninsured residents, is costing much more than expected — 32 percent more in its first year and an anticipated 20 percent more this year.

Migration from private insurance to the state’s fully subsidized plan has boosted costs for those who pay premiums by 5 percent to 9 percent in one year.

By contrast, Medicare Part D costs far less than was expected — by how much, depends on who’s measuring.

A scandal erupted in late 2003 when the Bush administration sold the program to Congress as costing $400 billion over a 10-year period, then abruptly changed the estimate to $534 billion.

But this March, the Medicare trustees said it would come in at $378 billion for fiscal years 2004-2013.

In 2006, the Congressional Budget Office estimated that the 2007-2016 cost would be $1.2 trillion. Its estimate has dropped every year and is now at $520.7 billion, 43 percent lower than expected.

When the prescription drug benefit was enacted, opponents predicted that few insurance plans would emerge to offer coverage. Instead, dozens did, causing critics to say seniors were confused by the choices.

However, surveys show high satisfaction with the program — 87 percent in a 2007 Wall Street Journal/Harris Interactive poll.

That’s partly because premiums are lower than expected. The monthly average for this year originally was expected to be $44. It’s actually $28, up just $3 from 2008.

The secret of Part D is that private insurance companies are competing for customers and offering them a wide array of choices. Seniors can switch plans once a year.

The Democratic health care reform plans unveiled so far — the Senate Health, Education, Labor and Pensions Committee plan and the joint House Energy and Commerce Committee and Ways and Means Committee plan — all envision private competition, but propose a government-run “public plan— to “compete— with them.

Some progressives make no bones about the fact that the “public plan— is meant to drive private health insurance companies out of business and replace them with “Medicare for all— or a single-payer system like Canada’s.

Obama, in a letter to Congress, said he wants a public plan “to keep insurance companies honest.— He has not defined what he wants.

But the House and Senate committees envision a plan that would pay hospitals and doctors what Medicare pays, plus 10 percent.

Such a plan could charge premiums significantly cheaper than private insurance — resulting in massive dropping of private insurance by employers and individuals.

The authoritative Lewin Group estimated this week that 96.7 million of the 160 million people now covered by private insurance might move to a “Medicare-plus-10— plan.

The difference between Medicare Parts A and B and Medicare Part D shows that when government sets prices, it does not hold down costs in the long run.

But there was one huge problem with Medicare Part D, too. Its cost — whether it’s $400 billion or $500 billion — was not paid for with tax hikes or spending cuts.

Obama wrote Congress that “health reform must not add to our deficits over the next 10 years,— though most estimates for covering the nation’s 47 million uninsured come in at $1 trillion to $1.5 trillion.

Eventually, making the health system more efficient — with digital medical records and chronic disease management — may cut the costs. But in the meantime, Democrats are looking to Medicare provider cuts and taxing employer-provided benefits as answers.

Left out are some ideas that Obama could adopt from Republicans and make the reform effort bipartisan — such as medical tort reform, means-testing Medicare and allowing small companies to form insurance-buying pools across state lines.

But the most proven cost-saver is intense private competition. And to “keep insurance companies honest,— Congress could add a “trigger,— as proposed by conservative Democratic Blue Dogs, so that if costs aren’t kept in line, a Medicare-like public plan kicks in.

The 2003 drug law actually has a trigger, but it has never had to be pulled.

Recent Stories

At Aspen conference, a call to prioritize stopping gun violence

Appeals court rules preventive care task force unconstitutional

Key players return to Congressional Softball Game, this time at the microphone

Bannon asks Supreme Court to keep him out of prison

Her family saw the horrors of the Holocaust. Now Rep. Becca Balint seeks to ‘hold this space’

Supreme Court clarifies when a gun law is constitutional