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U.S. Congressman Michael C. Burgess, Negotiation Medicare Part D, Addressing America's Challenge

April 01, 2017

Does ideological purity trump sound public policy? Of course it should not, but unfortunately it appears that we are on the threshold of profound changes to the Medicare part D prescription drug program. The changes are not being proposed because of any weakness or defect in the program. The changes are being proposed because a viable program lacks the proper partisan branding.

Since the inception of the part D program, America's seniors have had access to greater coverage at a lower cost than at any time since the inception of Medicare over 40 years ago. Indeed over the past year "saving lives and saving money", has not just been a catchy slogan, it has been a welcome reality for the millions of American seniors who previously lacked prescription drug coverage.

Under the guise of "negotiation" the Democrats propose to enact draconian price controls on pharmaceutical products. The claim is billions of dollars of savings, but experts in the Congressional Budget Office deny that the promised savings will actually materialize. The reality is: competition has brought significant cost savings to the program and subsequently to seniors who are actively using the program today.

Consider that the enrollment of Part D began in January of 2006 and has proven to be a success. CMS reports that approximately 38 million people, 90% of all Medicare beneficiaries are receiving comprehensive coverage either through Part D, or employer sponsored retiree health plans or other credible coverage.

Further the cost of the program for 2006 was $13 billion below budget estimates. Half of that amount of savings is attributed to competition. The projected average premium was originally $37 per month beneficiaries are actually paying an average premium of less than $24 per month.

92% of Medicare beneficiaries will not enter the Medicare drug benefits cost coverage gap because they will not be exposed to the gap or they have prescription drug coverage from plans outside of Medicare part B. Or their plan covers in the so-called gap. In fact as seniors re-enroll in the program for its second year the Medicare web site will help find plans that provide coverage and eliminate any gaps in coverage.

80% of the Medicare drug plan enrollees are satisfied with their coverage and a similar percentage says that out-of-pocket costs have decreased.

With all is going right about the program it seems unwise and unkind to jeopardize its success. Specifically just a month ago the Wall Street Journal reported that negotiating prescription drug prices may actually lead to higher prices for consumers. Further the Manhattan Institute for policy research advised that federal price limitations will result in decreased investment and research and development less new medicines and ultimately an overall negative impact on available pharmaceuticals.

Again consider: under the cloak of negotiation the reality is that federal price controls could have an extremely pernicious effect on the price and availability of current pharmaceuticals and those products that may be available to treat future patients. Is ideological branding so critical that it trumps providing basic coverage to senior citizens?

Thus the challenge: Would it not be better to continue a program that empowers the individual rather than create a new scheme which seeks to reward the supremacy of the state.

Appropriate Republican Principles

Making Medicare relevant for 21st-century was the impetus behind the Medicare modernization act of 2003. When Medicare was first created over 40 years ago the lack of the prescription drug benefit was an only passing inconvenience. However with the striking advancement in medical care, and the astonishing therapies that are now available, as a matter of public policy a large federal program had to be reformed. And at the center of that reformation was an absolute requirement that seniors have coverage for prescription medications.

Medicare had remained an acute care model in a medical world which had progressed to the long-term management of chronic conditions by interposing the availability of pharmaceutical agents. Providing coverage morphed from "would be nice" to a "must do".

And this was not a new idea. Several times over the past 40 years attempts had been made to add prescription drug coverage to the Medicare program. Indeed it was almost ironic that a Republican president, working with the Republican majority in the House and Senate could craft a plan to provide America's seniors with reasonable prescription drug coverage without saddling future generations with untenable cost.

The challenge of providing the benefit while balancing cost control was thought to be insoluble for many years. But the plan agreed to by a majority of the House and Senate, and signed into law by the president, captured the essence of market principles by providing a means by which competition made medications available at an affordable price.

Over the past year the program has quickly become firmly established and benefits seniors of all walks of life but provides a means for older Americans to maintain health of both their bodies and their pocketbooks.

Throughout all the debates that occurred in the past, and those which will occur in the future with proposed democratic revisions to the prescription drug plan, it is wise to keep focused on a few simple principles: provide the benefit without limiting access to medications, keep the government out of the seniors medicine cabinet, and ensure a method to contain cost year after year through competition rather than simply confiscating the intellectual property of the pharmaceutical manufacturer.

Appropriate Republican Policy

While crafting the policy that ultimately became the Medicare modernization act of 2003, the concept of protecting the inclusion of market forces in the legislation was a critical aspect of the ultimate bill.

In keeping in mind the central tenet of providing recipients of the large federal program access to prescription drugs with the emphasis being on taking care of those who were the least well off financially, and those who held the greatest health burdens.

The Republican policy trusted the marketplace, with some guidance, to be the most efficient arbiter of distribution to achieve the above goals.

We had no shortage of individuals who were concerned with the overall concept and scope of the program on the Republican side during the debates that led to the legislation. But it's very useful to compare the proposals that were proffered by the Democrats in Congress during the floor proceedings that led up to the vote on the bill.

Specifically, there would have been limits on seniors' access to medications, limits to access to pharmacies, and right from the beginning there was the tacit acknowledgment that there program would not be able to contain cost over time.

Advancing American Exceptionalism

The American health care system in general, and the federal Medicare program in particular, have no shortage of critics of the home and abroad. But it is the American system that stands at the forefront of innovation in new technology, precisely the types of system wide changes that are going to be necessary to efficiently and effectively provide care for America's seniors in the future.

Consider an article in the New York Times published October 5, 2006 by Tyler Cowan, who writes "when it comes to medical innovation the United States is the world leader. In the past 10 years, for instance, 12 Nobel prizes in medicine have gone to American-born scientists working in the United States, three have gone to foreign-born scientists working in the United States and just seven have gone to researchers outside of the country."

He goes on to point out that five of the six most important medical innovations of the past 25 years have been developed within and because of the American system.

Comparisons with other federal programs such as the VA system are frequently mentioned. It must be pointed out that a restrictive formulary such as that employed by the VA system would likely meet significant public resistance, because the near universal access of the most commonly prescribed medications under the current Medicare prescription drug plan. Some studies have estimated that nearly one quarter of those medications available under the current Medicare plan would be outside the VA formulary and thus unavailable to physicians and their patients.

The fact is that the United States is not Europe, American patients are accustomed to wide choices when it comes to hospitals, physicians and pharmaceuticals. Because our experience is unique and different from that of other countries this difference should be acknowledged when reforming either public or private health insurance programs.

Negotiation Medicare Part D (Click here to watch video)
U.S. Congressman Michael C. Burgess, M.D. (TX-26)

Vice Chairman, Republican Policy Committee