July 30,2019

ICYMI: Libertarian Cato Institute Supports Finance Committee’s Medicare Part D Reforms

 
“Would Not Impose Price Controls,” “Would Not Increase Taxes,” “Would Reduce Wasteful Medicare Spending”
 
“Commonsense Tweaks To A Bloated Entitlement Program Are Encountering Strong Opposition…Mostly From Those Who Would Not Make Quite As Much Money Off The Taxpayers”
 
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The most significant changes regard Medicare Part D. Many of these changes would be beneficial. Two of them – a redesign of Part D “standard coverage” and a cap on subsidies to drug manufacturers – would save taxpayers a projected $85 billion over 10 years. Predictably, the people to whom that taxpayer money would otherwise flow are trying to block those savings. (See “special-interest lobbying,”…
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The proposal would increase the insurers’ exposure and reduce both the enrollees’ and the taxpayers’ exposure. (See Figure 2.) Insurers would still pay nothing below $415 of drug consumption. They would then pay 75 percent up to $11,155 of total spending. …In effect, that’s a 20 percent price reduction, and the proposal would require the insurer to pay 75 percent—and taxpayers just 25 percent—of that reduced price.
 
That’s a good thing. When insurers pay a greater share of the cost of drugs above that threshold, they will drive harder bargains with drug manufacturers, and will do more to weed out low-value drug consumption. This change could even offset the incentives to over-consume that come from eliminating enrollee cost-sharing above that threshold….
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…these proposals are steps in the right direction. They would not impose price controls on prescription drugs; they would give insurance companies incentives to drive harder bargains with drug manufacturers, to the benefit of taxpayers. They would not increase taxes on anyone; they would reduce wasteful Medicare spending and the burden of government by a projected $85 billion over 10 years.
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The fact that these minor, commonsense tweaks to a bloated entitlement program are encountering strong opposition—again, mostly from those who would not make quite as much money off the taxpayers…
 

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