Lies, damn lies, and Medicare Part D

So, I’ve read on several occasions how Republicans point to Medicare Part D (the prescription drug benefit) coming in below cost projections as strong evidence for their claims that shifting more costs onto medical consumers (i.e., Ryan’s voucher plan for Medicare, etc.) will will actually drive down medical costs.  If you follow health care policy, you know that this cost shifting leading to lower overall spending is an entirely specious argument, but I was wondering just what the story is with Part D.  CBPP once again has done yeoman’s work in completely rebuffing this Republican distortion.  Short version: all prescription drug spending has come way down in recent years so it’s not at all surprising that Medicare Part D has, too.  A number of hugely popular drugs have gone generic without equally popular new drugs in the pipeline.  The consumer-driven spending has nothing to do with the cost-savings in part D.  The details:

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. [3]  Drug spending growth began to moderate unexpectedly and then slowed more significantly around the time the Medicare prescription drug benefit took effect in 2006.  But this was not caused by enactment of the drug legislation, as is evidenced by the fact that growth in spending on pharmaceuticals slowed throughout the health care system. ..

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. [7]  CBO now estimates, however, that only about 77 percent of Part B beneficiaries enrolled in Part D… That means 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.

Moreover, there is evidence that, far from reducing costs, the use of private plans to deliver the Medicare drug benefit has increased costs.   [Followed up by lots of good evidence based on Medicaid vs. Medicare comparisons.  Click through if you are curious.]

Thus, I return to one of the fundamental questions about Congressional Republicans in modern political discourse: lying or stupid?  Seriously– this analysis is not in the least bit complicated.  Do Paul Ryan et al., simply not understand that the savings in Part D largely reflect lower costs throughout the prescription drug section or do they simply not care.  Neither answer is flattering.

About Steve Greene
Professor of Political Science at NC State

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