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”
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,”…
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….
…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.
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…