Beware every single Democratic presidential candidate when it comes to the Medicare prescription drug benefit. All of them would implement a change that would ruin one of the most successful elements of the program.
Again and again on Tuesday night, as was the case in all discussions on the issue in prior debates, all the candidates agreed that “the government” should “negotiate” the prices for Medicare Part D drugs. Democrats have been pushing this idea for two decades, even before the Part D program was created in 2003 legislation. The statistics show the idea was bad then, and that the system has worked immensely better without government negotiation ever since.
Democrats originally would have “pegged” the average monthly premium cost at $35 for 2005, with government negotiation designed to keep annual cost increases no higher than the cost of medical inflation afterward. The idea was that the “purchasing power” of the federal government would keep drug companies and insurance companies from profiteering, thus keeping the prices down.
Republicans insisted instead that the free market would keep costs down better, and that artificial government interference would instead drive private insurers out of the market, such that less competition would result in higher, not lower, prices in the long run.
The numbers show Republicans were right. When fully implemented in 2006, the actual average premium was not the $35 peg-plus-one-year-of-inflation the Democrats projected, but $32 — a 14% savings from the original projection. Since then, the market has kept the average premium exactly in line with overall, ordinary inflation in the economy, rather than with the much higher rate of healthcare inflation in the intervening years. The $32 monthly in 2006, adjusted for overall inflation, is the almost-exact equivalent of the $42 monthly premium in force for 2020.
On the other hand, if insurance premiums had risen at the higher rate of healthcare inflation since 2005, the “government-negotiated” premium would now be $56, or 33% higher than it is. Granted, Democrats believe government negotiation would have been far more successful than that, but not even the most optimistic Democrat in 2003 would have predicted premiums under a private-only system would rise so little for nearly two decades.
The steady premium costs are more remarkable considering that Congress in later years significantly narrowed the so-called “doughnut hole” in Part D — originally a “gap” in coverage in which patients had to pay 100% of the drug costs. One would have expected the narrowing of the doughnut hole to increase demand for prescriptions significantly, thus sending prices higher. Instead, the market absorbed the change without any significant price increase.
Meanwhile, the costs to taxpayers have been nowhere near as high as predicted. When passed in 2003, the projected price tag of Medicare Part D was $552 billion for the first ten years (which is as far as the projection went). Instead, the cost came in $194 billion less than that, at $358 billion. Moreover, by providing drugs at low cost, Part D saved significant money in other parts of Medicare as well (for both patients and taxpayers) by keeping manageable health problems from getting worse, thus reducing the incidence of hospitalizations.
There’s also good reason to believe that letting government try to control prices would significantly deter research and development of new medicines, causing “millions to die,” as one think tank put it.
In sum, Democrats are proposing to fix a Medicare prescription drug program that already works just fine and to fix it in a way that will probably make it worse. The old maxim should still apply: If it ain’t broke, don’t fix it.
