Medicare

Sebelius Touts Plan to Gut Health Care Cost Control Mechanism

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When President Obama pitched his health care plan, he promised that it would help reduce "the spiraling cost of health care in this country." His proposal, he said, was designed to address "the explosion in health care costs has put our federal budget on a disastrous path." What he neglected to mention was that one of the most touted benefits in ObamaCare actually ditched one of the country's few working health care cost control mechanisms: the coverage gap built into Medicare's prescription drug benefit. 

To be sure, the Medicare prescription drug benefit signed into law by President Bush in 2003 was a bad idea. But it could have been worse. Much worse. Unlike just about every other major government health program, Medicare Part D has cost significantly less—about 45 percent—than originally estimated.

One of the reasons why it cost so much less than expected was that it included some smart cost control mechanisms, including something referred to as "the donut hole." The donut hole was a gap in the program's prescription drug coverage levels: For each year, seniors enrolled in the program were required to pay the full cost of drugs once their personal prescription drug spending reached a specified dollar amount. Once a given senior's yearly spending reached about $4,550, Medicare's coverage would kick back in, and at a higher level: Below the donut hole's lower bound, Medicare paid for about two-thirds of drug costs. Once a senior broke through the donut hole, coverage would increase to 95 percent. But anything purchased in inside the gap in yearly drug spending wasn't covered at all.

She's practicing her glare.

The idea was to encourage both seniors and providers to think twice about running up bloated  prescription drug bills. On the low end, with ordinary drug purchases, seniors would get a subsidy. On the high end, for the seriously ill, they'd get an even larger subsidy. But moving from the low end up to the high end would require seniors to pay a few thousand dollars out of their own pocket, and thus discourage them from racking up drug expenses unecessarily.

It was a not-bad idea that helped tame a bad program, and it almost certainly contributed to the program's lower-than-expected price tag.

It was also politically unpopular. And that's why ObamaCare's authors decided to get rid of it. It's also why Obama's Health and Human Services Secretary, Kathleen Sebelius, is touting the closing of the donut hole in today's Politico. Sebelius argues that the existence of the donut hole forces seniors to engage in "a terrible choice" about whether to spend up to $3,600 of their own money or forego prescription drugs. I guess it's not a terrible choice when the federal government money decides, as a matter of policy, to automatically shell out taxpayer money for those drugs instead?

Sebelius suggests that this will pave the way to "big savings," but fails to note that the likely outcome is actually higher prices for many prescription drugs. From a Washington Post report with the clarifying headline, "higher drug prices feared in 'donut hole' plan":

"There is legitimate concern that some manufacturers will steeply increase the price of drugs in order to offset the cost of the discount to the manufacturers at the expense of both consumers and the Medicare program itself," the Center for Medicare Advocacy and the Medicare Rights Center said in a letter to the agency that oversees the federal health insurance program.

…Some of the most expensive drugs taken by people in the doughnut hole face minimal competition from generics or brand-name alternatives, making them particularly susceptible to price inflation, said Brit Pim, vice president of government programs development at benefits manager Express Scripts. Those include "specialty medications" for complex diseases, he said.

This is ObamaCare's so-called "cost-control": politically motivated handouts that make prescription drugs more expensive while gutting one of the few policy mechanisms that's proven somewhat successful at restraining the health care spending we're already stuck with.

NEXT: Would Meek Compliance Have Saved Jason Kemp's Life?

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  1. Sometimes I wonder why I even bother working and paying taxes. I can just sit back, relax and have someone else pay for everything – as long as I promise to vote for the side handing out all these goodies.

    1. Being able to sleep well at night and look at yourself in the mirror in the morning?

      1. I can’t do either of those now.

      2. Those are what keep me working

      3. you obviously have never seen me.

    2. Get ready as things get worse this will be the direction that more people take.

  2. I’d like to throw in for consideration the fact that many prescription medications are available online from Canada for less than the out of pocket costs to people on Medicare too.

    With the Customs department formalizing the procedure to legally have prescription medications sent to you in the mail, and older people increasingly discovering the interwebs–since 2003–one of the reasons why people don’t use the Medicare prescription benefit as much as expected must be because it often costs less out of pocket to buy the prescriptions from Canada and elsewhere online.

    1. To be in favor of drug re-importation, is to be in favor of price controls.

      Prescription drug prices in the US, could be just as cheap as the prices in Canada. All we would have to do is implement the same price controls used by the Canadians, and voila, cheap drug prices.

      I am guessing that the majority of people here would not support price controls on drugs sold in the US. Why does is seem that so many do support controls, as long as the drugs are coming from Canada?

    2. Pharmaceutical companies use differential pricing across countries to recoup R&D costs in the US, because they can (and because socialized health care systems in other countries demand low prices or else).

      If the ban on reimportation is lifted, this free-riding would come to an end, and costs would come down in the US and rise elsewhere. That’s best case… it might also severely harm the development of new drugs like those cited “specialty medications.”

      Also, consumers buying over the border is one thing, but the new e-Pedigree laws for pharmaceutical chain of custody is going to prevent any reimportation at a retail level.

  3. Healthcare should be divorced from the private sector altogether. How about a NASA for medical research? Remember, despite your guys’ long-held convictions, drug companies do not succeed in competition by providing longer lifespans and better cures. They succeed by making higher profits, which is not the same thing.

    1. “NASA for medical research?”

      you mean the NIH?

      1. Yeah, yeah… like that, only another one.

      2. Yes–most successful drug therapies are developed with public funding being instrumental.

        1. [citation needed]

        2. How would the Human Genome Project have worked out with out private research?

          How many cancer therapies has the government developed and manufactured?

          I’m not arguing with your statement that public funding has been involved in the development of life saving drugs. If the government could produce these drugs effectively, without the private sector, than why haven’t they done so? Put a different way, why is it that the US has developed a far greater number of life saving drugs, than countries that rely more heavily on government research?

            1. OK. A privately funded company, Celera Genomics, was able to sequence the human genome, at a fraction of the cost and manpower required by an international consortium, involving the United States, UK, Japan, Germany, and other countries.

              1. The project began in 1989[2] and was initially headed by Ari Patrinos, head of the Office of Biological and Environmental Research in the U.S. Department of Energy’s Office of Science. Francis Collins directed the National Institutes of Health National Human Genome Research Institute efforts. A working draft of the genome was announced in 2000 and a complete one in 2003, with further, more detailed analysis still being published. A parallel project was conducted outside of government by the Celera Corporation, which was formally launched in 1998. Most of the government-sponsored sequencing was performed in universities and research centers from the United States, the United Kingdom, Japan, France, Germany, and China?

                The one that was launched by the American researcher Craig Venter, and his firm Celera Genomics. Venter was a scientist at the NIH during the early 1990s when the project was initiated?

                The one that Celera had incorporated the public data into their genome, but forbade the public effort to use Celera data.?

                1. Yup, Venter started out with NIH. Of course, when he went off on his own, he was at the same starting point as the multiple governments around the globe, who were researching the very same thing. The fact that Celera, and single company, was able to achieve the same results as at least five governments around the globe, should provide some insight when comparing the research capabilities of government, vs the private sector.

                  If my original comment had stated that the government was completely incapable of performing research, the above comment would be a good argument. However, my original point simply stated that any innovation performed by the government, has depended on the private sector.

                  1. He used the government research from the get-go. We were too stupid not to have him sign a no compete clause.

                    Celera stole government research when they refused to release their results while the government share theirs, as per their deal.

                    If your original comment, you stated that any innovation performed by the government, has depended on the private sector. Not only did I prove that your comment is incorrect but the reverse is true!!!!!!

                    1. The only think you proved, is your ability to copy and paste from Wikipedia. No big deal, except that the third item you copied does not have a citation.

                      Celera did make their share their data, they just didn’t share it through GenBank, because the database did not allow for Celera to protect their intellectual property. Instead, they made the data available on their own website.

                    2. bull shit

            2. I love this moronic non-response. Saying “prove it” just betrays your personal lack of reasoning or evidence to challenge an idea.

              1. marlok, don’t make me google your ass.
                Your use ‘citation’ as much as anyone else

    2. I could make a humorous analogy about Challenger and Columbia here, but I will refrain out of respect for the deceased.

      1. Never refrain from humorous analogies that mock those who once collected a paycheck signed by Uncle Scam.

      2. so private industry never has accidents and massive failure?

        1. why cry over a little spilt milk?

    3. Tony, the government keeps doing stupid things that increase the cost of healthcare and you want it completely divorced from the private sector? Are you nuts or stupid?

      Drug companies succeed at making very expensive drugs thanks to the FDA. If you want less but more expensive drugs then let some government body like NASA control research.

      How much evidence do you need before you pull your head out of your ass?

    4. “despite your guys’ long-held convictions, drug companies do not succeed in competition by providing longer lifespans and better cures.”

      Jesus Christ Tony that is even stupid for you. They don’t succeed at anything but people still buy their products anyway?

      At some point we are just going to have to admit the truth and clasify being a liberal as a form of mental disability. Maybe we could get the drug companies to get you dumb fucks the help you so clearly need.

      1. Liberalism as a mental disorder? Haven’t heard that one before. Certainly not from the drug-addled jowls of Rush Limbaugh or other similar paragons of policy wisdom.

        It’s not that hard to understand. Why would a drug company invest in a cure for something when they can just make a pill you have to take for the rest of your life? Which do you suppose is more profitable?

        Sometimes market forces generate superior products, but that’s not what competition is primarily about–it’s primarily about being more profitable.

        1. Exactly. Drug companies, have zero incentive to cure disease, which is exactly why cancer survival rates in the United States have remained stagnant in the United States.

          Their is a financial incentive to curing disease. In order for individuals to obtain a life saving cure, they have to purchase it. The company that only produces a drug that manages a disease, will soon lose out to the company that produces a cure to the same disease.

          1. “United States have remained stagnant in the United States”

            Probably didn’t need to use “United States” twice.

          2. “which is exactly why cancer survival rates in the United States have remained stagnant”

            Not because cancer is a really tough nut to crack and we have already done the easy stuff. Nope. It is a plot among the drug companies. And of course the evil drug companies manage to divert the billions of government research money to keep it from finding this easy cure.

            My God, it is full of stupid.

        2. Why would they cure anything. Not like anyone would buy a product that would make them better. I really think the country is doomed. there is no hope for people like you.

        3. “Why would a drug company invest in a cure for something when they can just make a pill you have to take for the rest of your life?”

          Because a cure for a given disease will outsell all of the competitors, insuring the inventor the entire market, while another pill that offers chronic management of a disease will enter an already crowded market unless it’s a true breakthrough (uncommon).

          Were you really unable to think of this?

          “It’s not hard to understand.”
          For you, it apparently is.

          1. I see you are stupid. I will google “marlok doesn’t understand anything about business”

    5. You mean the NASA that let their fleet of manned spacecraft retire without having planned a replacement? Or some other NASA?

      1. I mean the government agency that through directed funding and policy has been hugely responsible for the modern technological world. Private healthcare is a failure, and that’s why all developed countries eventually get around to the better option. We have the NIH, without whose research we’d be lacking many of the therapies that exist today.

        1. If its been so successful, why did you just advocate the need for a new one upthread?

        2. I am a health economist here in DC. I have a hard time listening to this dreck from the like of people like you. I am totally willing to say that we have the worst of both worlds-little efficiency or equitability. But to suggest single-payer would fix that overnight is a complete farse. I listen to you people bitch and moan about the salaries of the executives of Pharma, Health Insurers, etc. until you are blue in the face (a pittance compared to the system on the whole). Let’s remember that Canada and the UK are the outliers, most countries have heavily regulated private insurers. Also, don’t forget that there are ALWAYS two lines. One for the rich elites/politicos and then for the rest of the sweaty masses waiting in line.

          Also, the second I mention that Medicare and Medicaid piss away 50-200 BILLION dollars a year to fraud and abuse (more than the total GDP of many countries, potentially enough to cover the uninsured itself); your lot gets strangely silent and complacent.

          You are suggesting that the federal govt. pursue a military contractor like model for the development of pharmaceuticals? A model where all the risk is held by the govt. frequently (although there have been some modest improvements over time). I will be the first to agree with you that we might see more societally useful drugs (a new clas of antibiotics compared to more ED drugs and stuff to clear your toenail fungus), but the only reason would be because the govt. subsidizes all the loser drugs.

          Does that sound like a good deal in light of how we have seen the rest of this pan out?

          We have a system exactly as efficient as we let it be (a joke), but we also picked the most damn stupid way possible to try to cover the poor, uninsured, and elderly. Everything is a compromise, but we picked the absolute worst way of doing it.

          1. I am totally willing to say that we have the worst of both worlds-little efficiency or equitability. But to suggest single-payer would fix that overnight is a complete false.

            What is your solution? Or, were you just bitching and moaning too?

            1. I’ll let you know when I finish my book, lol.

              1. Is it called Bitching and Moaning Like A Man?

        3. “I mean the government agency that through directed funding and policy has been hugely responsible for the modern technological world.”

          What fucking planet do you live on Tony? They are responsible for some technological developments. But there is a pretty good chance someone would have figured out teflon without NASA

          And the Soviets had a bigger space program than the US. Yet oddly were no where near the US in technology.

          Look Tony, if your fantasies were reality, central planning would have worked and the Soviet Union and communism would have never failed.

          1. Which has proven more efficient at producing technological innovation? NASA or the X Prize foundation?

            1. The X prize is what? 10 million? NASA has spent how many hundreds of billions over the years? I would say per dollar spent, the X Prize wins hands down.

              1. Exactly. The X Prize foundation, by defining a goal, and creating a competitive environment to achieve that goal, has proven far more effective than central planning.

        4. Except that a majority of NIH “research”, isn’t direct research at all. The various bodies that make up the NIH, supports private research through grants.

          No doubt, NIH funding has played a key role in the development of life saving drugs, but is this funding stream used by research centers because it is “essential”, or simply because it there? Private research institute’s seem very capable of raising funds from private donors, when it comes to adding a new wing to a hospital, or various other activities in which public funding is not available. Why should we think that MIT, MD Anderson, or Duke medical center wouldn’t find other ways to fund their research, if they didn’t have access to NIH funding?

          1. Sure they would. All the more reason we dont’ need the government.

    6. Funny. I wasn’t aware that we were lacking for medical research. As far as I can tell, the private sector is doing just fine with medical research. The best example of private vs public research should be the Human Genome Project. It’s pretty clear which sector was the most effective in that breakthrough.

      drug companies do not succeed in competition by providing longer lifespans and better cures

      Right, Merck and Genentech gained nothing from manufacturing Temodar and Avastin, two drugs that have added years to the lives of cancer patients. Forget about the countless number of clinical trials that are currently being conducted to find cures for diseases, or at the very least, to extend the lives of people with fatal illnesses, so that they may live long enough to benefit from a future cure.

  4. Why indulge someone so tedious and boring ? Why ?

  5. “despite your guys’ long-held convictions, drug companies do not succeed in competition by providing longer lifespans and better cures.”

    So you’ve sworn off all prescription drugs since they’re worthless?

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