Congress should leave Medicare Part D alone

From early reports, it truly has been the season for giving for Republicans on Capitol Hill.

The year-end spending bill passed Friday removed the 40-year ban on exporting oil, but other than that, read as if written in the Democratic cloakroom.

And now, as the Senate takes up reconciliation legislation, the same principle seems to be in place. Republicans will get a top-line item they’ve sought for years – in this case, repeal of large parts of Obamacare – and Democrats will capitalize by taking less prominent but perhaps more significant victories.

{mosads}For instance, Democrats are saying if Republicans want to sabotage Obamacare, they will take it out on them and America’s seniors by sabotaging Part D – the Medicare prescription drug benefit.

They’re resurrected a proposal defeated many times before to remove the law’s so-called non-interference clause, which forbids the Department of Health and Human Services from intervening in negotiations among drug manufacturers, pharmacies and privately administered Part D plans.

They’ve never liked Part D. It was the creation of former House Majority Leader Tom Delay (R-Texas), who rankled them. It operates on conservative principles – the program created a truly private marketplace and Congress has let it operate on its own for much of its history.

And it’s working. Satisfaction rates are in the high-80s to low-90s, enrollment rates were 70 percent higher than expected, and it has cost the government far less than projected. Three times the Center for Medicare and Medicaid Services has lowered the 10-year cost estimates of the program, and all three times it has said savings resulted from not letting the Department of Health and Human Services intervene in drug negotiations.

But the Democrats just cannot let it go. They seem to think the principles of economics will be repealed upon their command. Part D plans are private. The government has no leverage other than to try to enforce caps, which would be disastrous.

The Congressional Budget Office has studied this proposal as closely as any Congress has put forth in the last 10 years, and it has found it to be a bad idea every time. Even President Obama, who promised in his 2008 campaign to rescind the rule and let government negotiate, has abandoned the idea.

When the legislation that created Part D was before Congress, Reps. Henry Waxman (D-Calif.) and John Dingell (D-Mich.) wanted to establish the monthly premium at $41 because they feared if government did not set the price, it would go far beyond that. The plans opened at about $22 per month on average and even now cost only about $30 per month.

It’s hard to imagine a better reason not to abandon the clause.

According to Douglas Holtz-Eakin, economist, healthcare expert and former head of the Congressional Budget Office, the savings generated have helped the program create a virtuous cycle government should leave alone.

“Insurance companies offering drug coverage through Part D negotiate directly with manufacturers to get the best price they can,” he wrote. “A lower price benefits the prescription drug plan directly, but it also allows it to lower premiums to attract seniors. Having lots of seniors gives the drug plan leverage to negotiate lower prices with drug manufacturers looking to build their market share.”

Government has no market share to build because it has no customers to deliver under Part D. Its only option upon this being made clear would be to try to impose price controls, which would crush the industry, eliminate research and development and drive prices up and quality down for consumers.

It is understandable this proposal would rear its head now. Hillary Clinton favors both striking the non-interference clause and price controls on some drugs, and high prices for certain obscure but necessary drugs have been in the news of late.

And, as Holtz-Eakin points out, it is tempting not to fight this because the reconciliation bill is not going to become law in its present form anyway. But it’s necessary, he says, to not allow a precedent to be set, to not accept bad policy under any circumstances and to make sure this does not happen.

McNicoll is a conservative columnist and freelance writer based in Alexandria, Va. He is a former senior writer for The Heritage Foundation and former director of communications for the House Committee on Oversight and Government Reform.