Medicare Part D and the Argument for Replacing Medicare with Vouchers for Purchasing Private Insurance
It is an article of faith among Republicans that the private insurance market is key to driving down health care costs. Medicare Part D which began in 2006 has cost less than the Congressional Budget Office predicted, that’s a fact. Is lower than predicted costs due to efficiencies made possible by competition among private insurers? This is an important question to answer because private insurance with public subsidy for the poor is what passes for a Republican health care plan.
Edwin Park cites two reasons for the decrease in projected costs:
(1)The sharp decline in growth in spending for prescription drugs throughout the U.S. health care system. In the late 1990s and early 2000s, prescription drug spending grew rapidly, reflecting the availability of new “blockbuster” drugs, rising prices for existing drugs, and greater utilization by beneficiaries. Drug spending growth began to moderate unexpectedly and then slowed more significantly around the time the Medicare prescription drug benefit took effect in 2006…. overall U.S. prescription drug spending was about 35 percent lower in 2010 than had been projected back in 2003
(2) Lower-than-expected enrollment in Medicare Part D. On average, about 93 percent of Medicare Part B beneficiaries were expected to enroll in the Medicare drug benefit (or receive employer-sponsored retiree drug coverage subsidized by Medicare) during its first eight years. CBO now estimates, however, that only about 77 percent of Part B beneficiaries enrolled in Part D or subsidized retiree coverage in 2010….roughly 6.5 million fewer beneficiaries were enrolled in Medicare Part D last year than originally projected, causing costs to be substantially lower than CBO originally assumed.
Cutting Medicare: Differences between Democrats and Republicans (cited in Esra Klein’s Wonkbook)
Medicare cuts aren’t created equal, writes Jonathan Cohn: “The key distinction between Democrats and Republicans — er, one of the key distinctions — is that Democratic cuts to Medicare focus on the providers and producers of Medicare. The most obvious and well-known among these are reductions in payments to private insurance companies that offer seniors coverage through what’s known as the Medicare Advantage program. This is basically an effort to eliminate some corporate welfare. Less well-known but equally important are the Democrats’ proposed reductions in payments to the rest of the health care industry. These reductions will take place alongside a series of experiments, offering financial bonuses to doctors, hospitals and other providers who can learn to operate more efficiently or effectively.”
Is there cost containment in the Ryan Voucher Plan? (again, from Wonkbook)
The Ryan budget isn’t serious about cost-containment, writes Howard Gleckman: “The House budget not only would replace Medicare with vouchers but also repeal the 2010 health law- which does include some real cost containment. Those provisions are exceedingly modest and many are in the nature of experiments–a good choice given how much we still need to learn about delivering cost-effective care…By repealing the health law, the House GOP would also eliminate the two key mechanisms seniors would need to buy insurance on the open market–a requirement that insurance companies not discriminate against those with pre-existing conditions (80 percent of those 65 and older have at least one) and exchanges though which buyers can shop for individual coverage.”