Medicare, the public program that provides medical care to those age 65 and up, is back in congressional cross hairs with rising deficits and a recent report from its trustees about its weakening finances.
But before Republican leaders rush forward with sweeping “entitlement reforms” — that’s code for asking seniors and future generations to pay more — they first need to pop the program’s hood, run some diagnostics and fix specific cost drivers. Let’s give the program, which serves 59.2 million Americans, a thorough tuneup before imposing far-reaching, untested changes.
One such dubious reform championed by U.S. House Speaker Paul Ryan: transitioning Medicare to a “premium support” model that would likely shift costs to seniors by capping the amount of money the federal government contributes to their care.
The equivalent of a lit-up dashboard indicator for would-be program mechanics came earlier this month in a review from the U.S. Department of Health and Human Services’ Office of Inspector General. The review focused on the cost of brand-name medications covered through Medicare’s Part D prescription drug benefit. Its findings raise troubling questions about drug prices’ rapid rise.
Despite a 17 percent decrease in the number of prescriptions, “total reimbursement for all brand-name drugs in Part D increased 77 percent from 2011 to 2015,” the review found. Costs “rose nearly 6 times faster than inflation” during the same period. That didn’t just drive federal spending on the program; it also affected Medicare enrollees. The percentage of Part D beneficiaries “responsible for out-of-pocket costs of at least $2,000 per year for brand-name drugs nearly doubled across the five-year span.”
The trends detailed are troubling for many reasons, but a big one is the program’s size. Medicare spending came to $588 billion in 2016 — about 15 percent of annual federal outlays. Even small increases in prescription drug spending amount to serious sums. Prescription drug costs are already 17 percent of Medicare spending and, if left unchecked, will consume an even greater share of program dollars, squeezing resources for hospital and doctor care.
The inspector general merits praise for singling out manufacturers’ responsibility for price increases and swatting down common industry defenses — that marketplace middlemen are responsible, for example, or that new drugs are solely driving costs. That the U.S. spends the most per capita on prescription drugs compared with other developed countries underscores concerns about whether consumers and the government, a huge purchaser of prescription drugs, are getting a good deal.
It simply makes sense for policymakers to drill down to find better value for Medicare dollars. Ideally, the government would directly wield its massive purchasing power to drive a harder bargain for medications it pays for. But that remains an uphill climb given pharmaceutical companies’ lobbying might.
Still, there are other doable solutions. President Donald Trump, to his credit, is among those calling for better deals from drug manufacturers. Though the “massive cuts” he promised have yet to materialize, the Food and Drug Administration is moving to streamline the regulatory process by which less expensive generic versions of brand-name drugs come to market. Medicare officials have worked to expand program access to generics.
Congress has also teed up a pragmatic solution with broad bipartisan support. It’s called the CREATES Act, and, if passed, it would help generic drug manufacturers clear additional roadblocks wielded by brand-name drugmakers to maintain their monopolies. Minnesota U.S. Sen. Amy Klobuchar is a leading advocate for this legislation, which cleared the Senate Judiciary Committee last week.
The bill “is good policy,” said Will Holley of the Campaign for Sustainable Rx Pricing advocacy group. He’s correct. It’s also an example of the kinds of nuts-and-bolts improvements that can and should be made before Medicare enrollees are tapped to shoulder higher costs.