Policy Documents

Medicare Drugs: Why Congress Should Reject Government Price Fixing

Robert E. Moffitt –
March 19, 2013

Robert Moffitt contends that Medicare Part D drug prices are currently set by private negotiation within a market of intense competition among drug plans. Ninety percent of Medicare enrollees have drug coverage, and Medicare Part D has kept costs remarkably low.

U.S. Sen. Amy Klobuchar (D–MN) has introduced legislation (S. 117) that would replace today’s private-sector negotiation of Medicare drug prices with government “negotiation.” This approach has the backing of a broad coalition of “progressive” groups. But the government does not negotiate prices; it fixes them. If a provider either cannot or does not accept the government’s fixed price, that provider is excluded from the program.

Changing Medicare Part D this way would gut a program that has exceeded expectations in the breadth of nationwide health plan participation, stable and low-cost premiums for Medicare beneficiaries, and a stunning “bend in the cost curve” unique in the health sector of the economy.