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November 5, 2015

The Medicare Part D Drug Program Is One Of Government's Most Efficient

  Forbes

The federal government annually hands out billions of taxpayer dollars in “improper payments,” especially in health care.  The term “improper payments” is broad and can include mistaken over- or under-payments, but intentional fraud is included.

According to the Office of Management and Budget’s (OMB) own assessment, the worst program is traditional Medicare at 12.7%, followed by Medicare Advantage at 9%.

Fraud-ridden Medicaid ranks third among the health care improper payments at 6.7%—which strikes me as way too low, at least historically.  But states are increasingly transitioning from the traditional Medicaid fee-for-service model to private sector Medicaid managed care, which may have helped reduce the fraud.

Next is the Children’s Health Insurance Program (CHIP) at 6.5%.

And at the very bottom of the health care improper payments pile is the Medicare Part D prescription drug benefit: 3.3%.

Why so much lower?  The program was designed to incorporate private sector participation and competition with minimal government involvement.

So which of these programs do Democrats want to fundamentally change, while leaving the others alone, or even expanding them?  Medicare Part D, of course.  Which just confirms the adage that the governing wisdom in Washington is: If it ain’t broke, then break it.

Part D has been operating for about a decade, and it clearly defies most government program stereotypes:

It has cost much less than predicted — The Congressional Budget Office (CBO) says that Part D spending was about 50% less in 2013 that the CBO had predicted when the law passed in 2003.  When CBO does these types of analyses it is usually talking about how much more was spent than predicted.

Moreover, Loren Adler and Adam Rosenberg, writing in the journal Health Affairs, argue that Part D played a large role in reducing total Medicare spending—which President Obama keeps claiming (and no one believes) was the result of Obamacare.

According to Adler and Rosenberg, “Despite constituting barely more than 10 percent of Medicare spending, our analysis shows that Part D has accounted for over 60 percent of the slowdown in Medicare benefits since 2011 (beyond the sequestration contained in the 2011 Budget Control Act).” (emphasis in original)

Competition, not price controls, explains the lower spending — Although many members of Congress, along with a few presidential candidates, claim letting the government negotiate drug prices would lower prices even more, the CBO praises the current set-up.

“The competitive design of Part D enables it to adapt flexibly to changing conditions, because plan sponsors (private insurance firms, each of which may offer several different plans) have ongoing incentives to develop new ways to control drug spending so as to minimize their costs, keep premiums low, and attract enrollees. Using the first few years of data from the Part D program, CBO found that spending was lower in years when, and in areas of the country where, more plan sponsors competed for beneficiaries.”

Seniors are very satisfied with Part D coverage — A July 2015 survey sponsored by Medicare Today, 89 percent of seniors age 65 and older said they were satisfied with their Part D coverage, and 85 percent said it was a good value.  When was the last time you saw 90 percent of the participants satisfied with a government program?

And, on top of those two successes, we now find out that Part D is far less subject to fraud and abuse, and mistaken payments, than the other government health care programs.

So, clearly, the left can’t let that situation go unchallenged, and Democrats are calling for a number of changes they say will make the program better.  Maybe they should cite Obamacare as THEIR model of low-cost efficiency!

But the real question shouldn’t be how Congress can change Part D to work more like other government programs, but how it can change other programs to work more like Part D?  For example, could we take the prescription drug benefit out of Medicaid and provide a stand-alone Medicaid Part D?

When you have a success story—and there are precious few of those in government—you ought to learn from it.


 

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