Debt-driver Medicare Needs Market-based Reforms: Part D better than Democrats’ price-fixing plans

Published November 2, 2012

In just a few days, the American people will decide who they want to lead the country for the next four years.

Whoever gets the nod will face big challenges in a short time frame.

An automatic cut to our defense capabilities, expiring tax cuts, possible cuts in Medicare payments to doctors and hospitals, and the possibility that we could reach our national debt limit are all issues that must be dealt with in the next three months.

The short-term fiscal cliff isn’t the only crisis that our political leaders must come to grips with. Our long-term financial picture, driven chiefly by out-of-control entitlement spending, threatens our economic and national security. You can’t pay the military if your country is broke. And my friends, we are broke.

We must find common-sense ways to fix these entitlement programs and curb our growing debt. One of the biggest drivers of our debt is Medicare.

I believe in Medicare. As someone who served in Congress for over two decades, I know how important the Medicare program is to our nation’s seniors. I also know that we can change the system to give participants in the program better quality and more choices at lower costs. I know that because we have done it with Medicare Part D.

When I served as Speaker of the House, we designed Part D to harness the efficiency of the market in order to give seniors choices and hold costs down. Under Part D’s structure, insurance companies compete for seniors’ business. Insurers negotiate prices with prescription drug makers, driving down costs; then they assemble a coverage package they hope seniors will find more attractive than the ones their competitors are offering.

Part D has helped ensure that 90 percent of seniors now have prescription drug coverage. Before Part D, about a third of Medicare beneficiaries didn’t have coverage, and many skipped their prescriptions in order to save money.

Use of needed prescription medications among seniors has increased as much as 12.8 percent because of Part D. That means seniors are staying healthier. Improved adherence to prescription drug regimens, a Harvard study found, has led to reduced hospitalizations and nursing home stays, saving Medicare $12 billion a year.

Part D works well, and it works economically. Over and over again, the Congressional Budget Office has lowered its cost estimates for the program. Medicare Part D is now expected to come in 43 percent below the CBO’s initial estimates.

Part D is cheaper than expected for seniors, too. Since the program began, premiums have gone up just 2.5 percent. For the past three years, Part D premiums have held essentially flat at around $30 a month.

This is a common-sense approach to Medicare: competition, cost-savings, choice and benefits that actually work. Part D is a program that seniors can count on. Surveys show that more than 90 percent are happy with their coverage under Part D.

Congressional Republicans believe in preserving Part D and its unique market-based approach to health care delivery. They are determined to preserve it for the 29 million American seniors who depend on it.

President Obama and leading Democrats, by contrast, are proposing a rebate/tax structure which amounts to de facto price controls on prescription medications. They simply ignore the demonstrated success of Part D’s competitive structure in holding down drug costs. Research by former Congressional Budget Office Director Douglas Holtz-Eakin has found that under Mr. Obama’s plan, Part D premiums that seniors have to pay would actually rise by 20 to 40 percent.

It’s no surprise that liberal Democrats want to gut the program. They’ve always opposed Part D’s competitive market structure and opposed giving seniors choices in selecting a drug plan. When we were passing Part D into law, House Democratic Leader Nancy Pelosi said, “This is the beginning of the end of Medicare as we know it. Most seniors will be worse off.”

She was wrong. Most seniors are better off because Part D has worked.

No matter who wins the election, the facts are the facts. Part D works, and it provides a great model for how we should reform Medicare so we can ensure that the program continues to survive for the next generation of retirees.

J. Dennis Hastert was Speaker of U.S. House of Representatives from 1999 – 2007. Originally published by The Washington Times.