Senator Jack Reed (D, RI) wants to repeal the Non-Interference Clause. He thinks it will lower the government’s prescription drug bill. He’s wrong. Let’s look at the record.
While Medicare as a whole is a fiscal basket case -- due to run out of money in 2024 -- Part D has been the very model of a well functioning federal program since its implementation.
The Congressional Budget Office (CBO) found that, between 2004 and 2013, Part D will cost an extraordinary 45 percent below what was initially estimated. Premiums for the program, meanwhile, are roughly half of the government’s original projections. Part D enrollees pay, on average, $30 a month -- a rate that has remained essentially unchanged for years.
It’s no wonder that beneficiaries are so pleased with the program. In fact, 96 percent of those enrolled in Part D say that their coverage works well.
These unprecedented results are largely due to Part D’s market-based structure. Beneficiaries are free to choose from a slate of private drug coverage plans, forcing insurers to compete to offer the best options to American seniors. It’s hardly surprising that the program has led to low prices and satisfied customers.
Through their own negotiations with drugmakers, private insurance plans that operate under Part D have already had great success in keeping pharmaceutical prices down. In fact, the CBO has observed that Part D plans have “secured rebates somewhat larger than the average rebates observed in commercial health plans.”
What’s more, the CBO has said time and again that doing away with the non-interference clause “would have a negligible effect on federal spending.” In a report from 2009, they reiterated this view, explaining that such a reform would “have little, if any, effect on [drug] prices.”
In fact, allowing the feds to negotiate drug prices under Part D would likely have a negative effect on the program. The CBO predicts that, when HHS forces pharmaceutical firms to lower the cost of a particular drug, this tactic brings with it “the threat of not allowing that drug to be prescribed.”
Senator Reed is lost in the wilderness.