H.R. 4 would provide that the government “negotiates” prices for Medicare beneficiaries in prescription drug plans. As we see it, this would involve at least setting a ceiling price on what prescription drug plans are permitted to pay for life-saving drugs.
We see a fundamental problem in the future of Medicare. As everyone is aware, the demographics in the near future will mean far less money coming into Medicare than goes out. This will require one of three basic alternatives:
First, massive tax increases which are politically improbable,
Second, less money per beneficiary when adjusted for healthcare inflation, which will necessarily mean rationing,
Third, allowing older Americans who choose to do so to add their own money on top of the government payment in order to get healthcare plans less likely to ration.
In 1997 and 2003, the National Right to Life Committee persuaded Congress to allow this third alternative, through what are known as private fee-for-service Medicare advantage plans. Unlike other Medicare advantage plans, these plans—as long as they pay at least Medicare imbursement rates and cover what Medicare covers—are not regulated by the federal government in what they can pay out for drugs or services, or in what they can charge in premiums.
In 2006, about 800,000 beneficiaries chose private fee-for-service plans, and it is predicted that there will be a surge in enrollment for 2007, although we don’t have the figures yet.
Unfortunately, H.R. 4 would begin to dismantle this escape hatch from rationing by reimposing what amounts to government ceiling prices on what can be paid for drugs, and would thus curtail the ability of older Americans to escape rationing by adding their own funds.
We believe that allowing middle-income Americans voluntarily to buy into these plans by putting more money into the system allows private sector cost shifting that will also make drugs and medical care more available through undercompensated and uncompensated care for those who can’t afford to add their own funds.