Wednesday, October 5, 2011

Democrats’ Hypocrisy on Cutting Medicare Benefits

The Hill reports this afternoon that several dozen Democrats sent a letter asking the supercommittee “to allow Medicare to negotiate prices for prescription drugs.”  The article goes on to cite a report from House Democrats claiming that “price negotiations could save the government $156 billion over 10 years.”  However, the Congressional Budget Office has previously – and repeatedly – indicated that the only way to achieve savings through drug “negotiation” is by restricting access to therapies for seniors.

For instance, in January 2007 CBO said that “without the authority to establish a formulary, we believe that the Secretary would…lack the leverage to obtain significant discounts in [her] negotiations with drug manufacturers.”  And in April 2007 CBO similarly concluded that drug “negotiation is likely to be effective only if it is accompanied by some source of pressure on drug manufacturers to secure price concessions.  The authority to establish a formulary, set prices administratively, or take other regulatory actions against firms failing to offer price reductions could give the Secretary the ability to obtain significant discounts in negotiations with drug manufacturers.”  In other words, the only way to achieve the $156 billion in savings Democrats claim would come from “negotiation” would be to impose harsh restrictions on seniors’ ability to access prescription drug therapies.

Given all this, some may find it a bit rich that Democrats are also criticizing those who discuss “cutting Medicare benefits” – because that’s exactly what their proposal for $156 billion in “savings” from drug “negotiation” would do.  As has been previously reported in this space, Medicare faces MAJOR structural problems – its budget deficit is larger than Greece’s, and the President’s own chief of staff admitted that the program “will run out of money in five years if we don’t do something.”  Solving these entitlement problems requires a real commitment to solutions, not the false promise that the program’s problems can be painlessly waved away through political sloganeering.