Looking For Ways To Reduce Medicare Spending? Look No Further That Part D

by Douglas E. Schoen


As it becomes clear the President Obama is making Medicare a key topic for discussion within the broader context of federal spending, Democrats and Republicans have an opportunity to pursue common-sense reforms that preserve the program while achieving bipartisan support for fixing what isn’t working.

Despite ongoing reservations, I believe that some parts of the Affordable Care Act can conceivably be implemented with minimal dislocation, but only if the right policies are embraced by the administration. And that’s why I think that the president is making a mistake in proposing potentially damaging changes to arguably the most effective part of Medicare, instead of building on its progress and finding a way to drive long-term cost savings by keeping seniors healthy.

The Medicare program component in question is the Part D drug benefit that George W. Bush signed in 2003 (later implemented in 2006). Part D was created to cover the drug coverage gap that that once existed in the Medicare’s plan for older and disabled Americans. Under Part D, seniors choose from a wide variety of privately run drug plans that negotiate individually with drug makers: seniors pay far less than they used to for coverage.

According to a recent survey, the program has a 90 percent approval rating and, unique among major federal programs enacted in recent years, will actually cost less-$334 billion less- than original estimates. Even better, improved access to drugs appears to be saving costs elsewhere: The Congressional Budget Office found every one percent increase in prescriptions filled results in a .20 percent decrease in spending in Medicare.

Part D works so well because it recognizes both the virtues-and the limits-of free, competitive markets. On one hand, the very existence of the program acknowledges that Americans have a collective responsibility to help older and disabled individuals afford the medicines they need. On the other, by prohibiting government bureaucrats from trying to set prices, it leaves dozens of individual market players free to figure out the best way to meet consumer needs.

In fact, the process works so well that the Congressional Budget Office says the government-run negotiations some in the Democratic party want wouldn’t save taxpayers a single penny.

Likewise, the misguided “rebate” proposal that President Obama referenced in his State of the Union Address would alter the program unnecessarily. Clearly the president means well, but the record shows that it just won’t work. Indeed, the government’s most significant experience with trying to single-handedly run a prescription drug program, the Department of Veterans’ Affairs’ health system, has so many gaps and omissions that more than 40 percent of its enrollees end up electing to pay for Part D or other privately provided coverage.

This is why President Obama and my fellow Democrats should capitalize on the important lessons we’ve learned from Part D and make the program their own. Even with the recent success in holding down Medicare costs (the rate of cost increase has dropped by nearly 300 percent), everyone who looks at the program overall agrees that its current anticipated spending path can’t be sustained much longer.

Put simply, both Democrats and Republicans have an opportunity to drive bipartisan cooperation and reduce health care spending through a proven government program. Senior will welcome it and Medicare will be in better shape as a result.

Douglas Schoen is a political strategist and author of Hopelessly Divided: The New Crisis in American Politics and What it Means for 2012 and Beyond, published by Rowman & Littlefield Publishers.

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