The Magazine

HillaryCare Comes Back

The disastrous Democratic Medicare drug plan.

Dec 25, 2006, Vol. 12, No. 15 • By ROBERT M. GOLDBERG
Widget tooltip
Single Page Print Larger Text Smaller Text Alerts

Michael J. Fox made headlines for Democrats in the recent election campaign by promoting federal funding of embryonic stem cell research that the actor deems critical to finding a cure for Parkinson's Disease. Unbeknownst to him, his message was part of a massive bait-and-switch. That's because the Democrats also promised Medicare reforms that would have the effect of denying seniors access to new Parkinson drugs and of undermining investment in stem cell research--indeed, in all kinds of pharmaceutical research.

The Democrats' Medicare plan would allow the government to negotiate prices directly with drug companies. This, they argue, could cut prices enough for the government to pay for 100 percent of the prescription drug costs of every senior in America. The political appeal of this proposal is self-evident.

The Medicare legislation creating the prescription drug benefit that took effect in 2006 (known as Part D) prohibited the government from negotiating directly with drug or biotech companies in order to guard against price controls. Instead, pharmacy benefit managers--the same service organizations most health plans use--would negotiate drug prices, pay pharmacy claims, etc., while offering competing versions of the Part D benefit to seniors. Democrats and most policy experts predicted the new drug benefit would be confusing and unworkable, that seniors would fail to sign up, and that those who did would receive scant coverage as drug companies jacked up prices to cash in on sweetheart deals absent any government jawboning.

Liberal and conservative opponents of the Bush program both predicted that angry seniors by this fall would be headed to the polls outraged at the cost, complexity, and inadequacy of their new drug benefit. In fact, as the Washington Post reported (after the election), polls show 80 percent of those covered are satisfied with the plan. The plan covers 22.5 million people who previously had no prescription drug coverage. Another 9 million poor seniors have their entire drug costs covered, with fewer restrictions on choice than under the state or Medicaid programs on which they previously relied. Under the lash of competition, the cost of the program has been lower than expected--by a whopping $26 billion in 2006. Medicare officials believe the plan's average per-person subsidy will drop 15 percent next year to under $80 per month, even as the out-of-pocket costs of seniors continue to drop.

Unwilling to recognize the good news, Democrats have consistently pointed to the government-negotiated drug prices offered by the Department of Veterans Affairs as a model for what they would do with Medicare Part D. Ron Pollack, executive director of the liberal advocacy group Families USA (which supported a market-based approach to Medicare drug coverage when Democrats and President Clinton advanced it in 2000), has asserted, "Medicare is overwhelmingly the largest purchaser [of prescription drugs], and it's ridiculous for Medicare not to get the best deal of all institutional purchasers."

However, both the Congressional Budget Office and Medicare analysts estimate that the government could do no better than a private company in negotiating prices. So why do Democrats insist they can? Because they aren't proposing market-like negotiations but a combination of price controls and restrictions on what drugs seniors can use. In a word: HillaryCare.

Far from negotiating drug prices, the VA imposes them. Federal law requires companies to sell to the VA at 24 percent below wholesale price. If they won't, they are banned from selling medicines to Medicaid, Medicare, and the public health service. The VA demands even deeper discounts by creating a national formulary--a restrictive list of approved drugs for its patients. Companies that don't meet that additional discount don't make the list. Patients must get drugs from VA pharmacies instead of retail outlets. Patients who endure side effects from a formulary medicine--or who fail to respond to one--must submit themselves to an arduous and time-consuming bureaucratic process to gain access to any pharmaceuticals not on the list.

In opposing the Medicare Part D reform in 2003, Democratic senator Patty Murray stated that she "was unhappy at the prospect that this plan could tell patients with MS, Parkinson's disease, and ALS that they can't get the drugs they need because their plan will not cover them." Yet Azilect, the newest drug to treat the symptoms of Parkinson's disease, approved in 2006, is not on the VA drug list, though every Medicare Part D plan has adopted it. In delaying access to new medicines, the VA is no different from the national health services of Canada and Great Britain. Tysabri, a new drug for multiple sclerosis, is available under every Medicare plan. It is not on the VA drug plan.