Can we really afford to change Medicare Part D?

A Build Back Better Proposal That Didn’t Become President BidenJoe Biden Overnight Energy & Environment – American Clean Power – Supreme Court to Review Power Plant Rule Case Harris Makes Final Pitch for McAuliffe Overnight Health Care – Presented by Altria – Toddlers One Step Closer to Vaccine MORE‘reconciliation invoice’structure‘is to allow the federal government to negotiate prescription drugs in the Medicare Part D program. A framework is not legislation and this provision could still emerge as a compromise in the final bill.

Called “payment,” the repeal of Medicare’s current Part D price negotiation structure could pay for the massive expansion of other federal programs included in the Build Back Better agenda. An estimate from the Congressional Budget Office (CBO) for the government’s negotiation of Medicare Part D prices was at least $ 345 billion in savings from 2023 to 2029. Another estimate showed $ 581 billion in federal cost savings by 2030.

Since its implementation in 2006, Medicare Part D has been a successful and popular program among seniors. According to a 2014 study, getting prescription drug insurance through Part D was tied to a 8 percent reduction in hospital admissions resulting in a 7 percent decrease in Medicare cost savings.

As currently structured, Part D prescription drug prices are negotiated between pharmaceutical manufacturers and prescription drug plans that have been successful in negotiating reimbursements, while giving physicians more freedom to prescribe. what they think is best for their patients.

The success of the program is largely due to a provision called non-interference clause, that specifically prohibits the Secretary of Health and Human Services from interfering in the price of prescription drugs and leaves the negotiations for said price to insurers and pharmacy benefit administrators. The lack of government intervention in Part D drug price negotiations has allowed market forces to create greater competition and available treatment options for Medicare beneficiaries.

Medicare Part D has also provided monthly premium stability and many plan options to choose from. To 2020 Kaiser Family Foundation The analysis showed that the average Medicare beneficiary had a choice of 28 stand-alone drug plans and 24 Medicare Advantage plans available to choose from, with privately negotiated discounts and reimbursements for all prescription drugs in each plan.

The repeal of the non-interference clause would allow the secretary of the US Department of Health and Human Services to negotiate the cost of prescription drugs and require a formulary that includes some drugs and excludes others. If drugs that are deemed unworthy of being included in the federally negotiated formulary are no longer covered by Medicare, some people will lose access to their preferred treatments.

Advocates of government bargaining have compared this proposal to the process used by the Department of Veterans Affairs (VA) as a way to justify it. However, this comparison falls short. On the one hand, the VA health system uses a closed set of providers, with centralized administration of coverage, acquisition and distribution of drugs. Their prices do not include the retail distribution costs that a much larger number of patients in the general population must pay. Those costs would have to be covered in some way if Medicare Part D took a similar approach.

A 2013 study indicated that more than half of veterans use supplemental benefits outside the VA to get the drugs they need. So while the VA system leads to price reductions, it also reduces the options. If this type of system were expanded to Medicare Part D, many more people would find themselves in a similar situation.

Limiting older people’s access to medicines is not the only worrying aspect of this proposal, the long-term implications on innovation in the pharmaceutical industry must also be considered.

The pharmaceutical industry’s R&D spending on new drugs is influenced by three main factors: the revenue they expect to earn from a new drug, the expected cost of developing it, and the policies that influence drug supply and demand.

If Medicare’s non-interference clause is repealed, an analysis by the Congressional Budget Office predicted the expected return on investment for newly developed drugs fall between 15 and 25 percent and as a result, it is estimated that this would lead anywhere from eight to 15 fewer new drugs it will hit the market over the next 10 years. In other words, it would weaken the incentive to innovate, resulting in fewer pharmaceutical innovations reaching the market.

Restructuring Medicare to cut spending to pay for increased spending in other federal programs is irresponsible. The bigger question that goes beyond budgets is: can we really afford to reduce older people’s access to the medicines they need and develop fewer life-saving treatments over time? No, we really can’t.

Mia Heck is the Vice President of External Affairs and Health Fellow at the Joseph Rainey Center for Public Policy.

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