by Peter Pitts
President, Center for Medicine in the Public Interest
From November 15 until the end of the year, seniors can sign up for Medicare Part D -- the prescription drug benefit for seniors. And those who are unhappy with their existing coverage can switch to a new plan.
All those eligible should take advantage of this “open enrollment” period. The healthcare reform bills working their way through Congress might soon make serious -- and unnecessary -- changes to Part D. And the consequences could be dire.
Unlike most public health programs, the Medicare prescription drug benefit is administered by the private sector. The program is subsidized by taxpayer dollars, but seniors are allowed to select the drug benefit that best suits their needs. Providers compete for this business, which leads to more choices, better service, and lower premiums. This feature -- the freedom to comparison shop between competing Medicare drug plans -- is one of the reasons the program is both popular and cost effective.
Part D has a 92 percent satisfaction rate among its beneficiaries. And the program has reduced the number of seniors without a drug plan by 17 percent. Meanwhile, the price of Part D over the next decade is expected to be nearly $120 billion less than originally estimated when the program was created.
But the recent push for healthcare reform has put the program in danger. The healthcare bill recently passed in the House would enable the federal government to “negotiate” Medicare Part D drug prices. The government doesn’t negotiate, though. Just look at the drug benefit administered by the Department of Veterans Affairs (VA).
At the VA, the government “negotiates” prices by requiring drug companies to sell their medicines at a price that’s s at least 24 percent of the non-federal average manufacturer price. That’s a price control; not a negotiation. When drug companies refuse to play ball, they’re not on the VA’s drug formulary, or list of preferred drugs.
The Lewin Group, a health policy consulting firm, recently found that the VA formulary contains less than 65 percent of the nation’s 300 most-popular prescription drugs as a result of government negotiations. The most popular Part D plan, by contrast, covers nearly 95 percent of those meds. Of the brand-name drugs on the top-300 list, just 42 percent are on the VA formulary. A full 97 percent are available under the most-popular Part D plan.
Another provision being considered on Capitol Hill would force pharmaceutical firms to offer a substantial rebate to the government for all drugs used by low-income Part D beneficiaries. Lowering the price of drugs for one group of seniors, though, would cause drug prices to rise for every other senior. The nonpartisan Congressional Budget Office has concluded that this proposal could cause drug prices to rise by 20 percent for most seniors!
Any sort of price-fixing scheme would also stifle research and development. On average, it costs more than $1 billion to produce a new drug. Pharmaceutical companies must be able to recoup that cost. If government bureaucrats start tampering with drug prices, investment in new treatments will drop off dramatically.
Fortunately, none of these provisions have been signed into law.
The open-enrollment period gives seniors a valuable opportunity to get the most out of their Medicare drug benefit. Even beneficiaries who are happy with their current Part D plan should visit www.Medicare.gov and consider their options. There are dozens of plans out there, so everyone should be able to find one that’s both affordable and well-suited to their needs.