As many as 36 million Americans narrowly dodged a recent proposal from the Centers for Medicare and Medicaid Services (CMS) that would have advanced unprecedented government intrusion within the Medicare Part D prescription drug program.
CMS never offered a satisfactory reason for its proposed tinkering with something that's working. Part D is a real rarity -- a genuinely popular and cost-effective federal health program. The proposed reforms were not only unnecessary; they would have compromised affordability, limited treatment options for patients, and stifled innovation in the insurance industry.
Though the misguided proposal has been shelved, Part D is still at risk. The Obama administration has pledged to push through a similar plan in the near future.
By all accounts, Medicare Part D is overwhelmingly successful. The program offers drug coverage to seniors for a monthly average of $31 and enjoys a 90 percent approval rating among beneficiaries.
Unlike other healthcare benefits, Part D is also cost-effective for taxpayers. The nonpartisan Congressional Budget Office (CBO) reports expenditures are now 45 percent below original cost projections.
And because Part D provides access to vital medicines, the program helps seniors avoid expensive stays in hospitals and nursing homes. Over half of beneficiaries report they would be "more likely to cut back or stop taking medicine altogether" without Part D coverage. In this way, Part D saves our healthcare system $12 billion annually, according to a study in the Journal of the American Medical Association.
In light of the program's remarkable track record, it's inexplicable why CMS would attempt to tamper with important aspects of Part D.
As part of the proposed changes to Part D, CMS wanted to eliminate rules that provide "protected class" status to mental health drugs and drugs used for autoimmune diseases and organ transplant patients.
If the reform had taken effect, private plan providers may no longer have covered many of the medicines included in these designated categories. Countless Part D beneficiaries would have lost access to the drugs they were currently receiving and need to stay healthy.
CMS claimed that the proposal would lower prices by giving private plan providers better negotiating leverage with pharmaceutical companies. But that rationale ignores the fact that costs for these drugs have already been falling for years. From 2006 to 2010, in fact, prices for protected-class drugs dropped by two percent, despite an explosion in overall healthcare costs.
The idea that federal regulators can intervene to help negotiate better prices is dubious at best. And CMS didn't offer any quantitative evidence that restricting vital medications would benefit either seniors or the federal government.
Indeed, Part D works specifically because it encourages open competition between private insurers who are eager to serve Medicare's huge prescription drug market.
Nevertheless, federal regulators sought to reinterpret certain parts of Part D's "non-interference clause" -- the part of the law that forbids regulators from distorting the market by intervening in drug price negotiations. The proposed changes would have allowed the government access to all agreements struck by drug manufacturers, pharmacies, and insurers.
The new rules would have also limited the number of bids an insurance plan may offer in a region to two. By reducing the number of plans available, CMS would have weakened competition between insurers while also preventing plan providers from experimenting with new policies. Uncle Sam wants to reduce competition? What would the Federal Trade Commission have to say about that?
On top of all that, the agency suggested changes that would encourage nearly every employer who offers health insurance for retirees to drop prescription drug coverage.
There was one common thread running through these proposed changes to Part D: they all restricted choice and discouraged competition. The Obama administration, it seems, isn't content with a healthcare entitlement that relies on market forces -- no matter how cost-effective or popular the program may be.
When the Obama team shelved its plan, CMS Administrator Marilyn Tavenner only promised to pull it only "at this time." In fact, she committed to "advancing some or all of the changes in these areas in future years." So Part D isn't yet safe. In the future, if regulators want to sabotage the most successful federal health program in the country, the least they could do is explain why.