President Obama and his allies in Congress want to “reduce taxpayer subsidies to prescription drug companies” and have set their sights on the Medicare prescription-drug benefit, Part D. While they are using the term, “rebate program,” to hide their true intention, funding Obamacare, it’s time we all come to grips with how this will not only affect the program, but all taxpayers.
Using the term, “rebate program,” one would think there is some good for the taxpayer. In reality, the use of the word is simply a diversionary tactic. The president’s proposal will serve as nothing more than a new tax on Medicare Part D and unfairly raise premiums for seniors enrolled in the program.
Medicare Part D, like most government programs, has divided Americans. The problem most have with government programs is that they cost too much, never stay within cost estimates and get in the way of the free market. Surprisingly, however, Part D is the exception.
Not only is Part D serving seniors the way it was designed, but it’s also driving down costs and saving Medicare money.
A program which began in 2006, Part D was a Republican-led initiative that added a market-based prescription drug coverage to seniors’ overall Medicare package. Seniors have a choice of a variety of plans offered by private insurance companies competing for their business. In Florida, Part D beneficiaries can pick from 34 different plans. The result of this competition is lower costs.
Florida seniors pay an average monthly premium of $38. Nationally, seniors saved $2.5 billion on drug costs in 2012 and $2.3 billion in 2011. In fact, a 2012 analysis from MedPac found the average price of Part D drugs increased just 1 percent in the program’s first four years.
And today, Medicare Part D is still beating its initial cost estimates.
Medicare trustees originally projected Part D beneficiary payments would total $115.7 billion in 2010. They’re about half that. In fact, the Congressional Budget Office now estimates that Part D will cost 45 percent less than the original 2004-2013 forecast. Looking ahead, the CBO reduced its 10-year Part D cost projection by $100 billion in 2011 and again in 2012 by another $100 billion.
Initial projections also anticipated that beneficiaries would be paying an average $60 monthly premium. Today, the average monthly premium nationwide is just $30.
Have you ever heard of such a thing in a government program?
Medicare Part D works well precisely because of the market mechanisms built into it and the provisions they put in place to keep government’s role to a minimum. Part D even has a “noninterference” clause that prohibits the federal government from intervening in the private price negotiations between insurance plans and drug manufacturers.
This is precisely what Democrats, led by President Obama, want to change. They would like the government to play a much more intrusive role.
They have in mind introducing a scheme whereby pharmaceutical companies must pay the government a “rebate” on each prescription sold to seniors who qualify for both Medicare and Medicaid — so-called “dual-eligibles.”
It’s really a system of price controls designed to make drug companies sell at below-market rates, as they currently must for Medicaid.
The result is simple to predict. If drug companies get below-market revenue from sales to one particular group, they will seek to recoup their losses from others. A study by The Lewin Group found that monthly Part D premiums for all seniors who are not “dual eligibles” could rise by 25 percent to 50 percent under a mandatory rebate scheme.
And that’s why elected officials need to push back against the Obama administration’s proposal to fund Obamacare through a so-called Medicare Part D rebate that will destroy the one government program that not only costs less than originally estimated and has proven to cost less year after year, but has successfully incorporated free-market based forces allowing it to continue to drive down costs.
Florida GOP Sen. Marco Rubio needs to understand that Medicare Part D is not just another government program. He must recognize that President Obama’s rebate program will only increase costs for our senior’s prescription medication plans and taxpayers alike.
While robbing Peter to pay Paul will most certainly guarantee the support of Paul, Sen. Rubio needs to stop the Obama administration’s attempt at stealing from Florida seniors.
Jason Hoyt is a co-founder of the Central Florida Tea Party and a founding board member of the Florida Alliance and the National Tea Party Federation.