The WasteWatcher: The Staff Blog of Citizens Against Government Waste

Conservative Groups Oppose Medicare Part D Changes in the BBA

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


On March 8, Citizens Against Government Waste (CAGW), penned a blog which pointed out a harmful and major change to Medicare Part D that will cost pharmaceutical manufacturers far more than anticipated: $4.1 billion over 10 years, a 53 percent increase from the Congressional Budget Office’s (CBO) original score.  Some may think whacking pharmaceutical manufacturers with an additional, unexpected cost of $4.1 billion over ten years to the $40 billion the industry is already on the hook for, is a good thing but, that cost will be paid for with less competition in Medicare Part D, higher drug prices, decreased research, and fewer jobs.

Today, several fiscal conservative groups signed a joint letter to Speaker Paul Ryan (R-Wisc.) expressing their opposition to the change, stating it will upset the checks and balances that made Medicare Part D a successful program and exposing taxpayers to new and expensive risks.  We asked that the change be reversed.

Background:

During the debate of the Bipartisan Budget Act (BBA), Congress increased the discount brand-name pharmaceutical manufacturers must provide in the Medicare Part D coverage gap, or “donut hole,” from 50 percent to 70 percent.  At the same time, a sponsor’s drug insurance plan commitment was reduced to five percent.  The out-of-pocket responsibility for the patient was set at 25 percent, albeit a year earlier than was determined under the Patient Protection and Affordable Care Act (ACA), or Obamacare.

This major change was determined without the benefit of any congressional hearing or an opportunity to fully debate how it would affect the Medicare Part D program, the cost of pharmaceuticals, Medicare beneficiaries, or taxpayers.

Senator Mike Enzi (R-Wy), expressed his concerns about the change to Medicare Part D in an April 11, Senate Budget Committee hearing and that the CBO had changed its original cost estimate.  He asked CBO the following about the change to Medicare Part D:

It has come to my attention that shortly after passage of the Bipartisan Budget Act of 2018 CBO realized its estimate of a provision related to the Medicare Part D ‘donut hole’ was incorrect ... Please describe the budgetary effects of this provision of law as now incorporated in the most recent baseline.

The CBO responded:

… When the legislation was being considered, CBO estimated that provision would reduce net Medicare spending for Part D by $7.7 billion over the 2018–2027 period.  CBO subsequently learned of a relevant analysis by the Centers for Medicare & Medicaid Services and incorporated that analysis in its projections for the April 2018 Medicare baseline.  The current baseline incorporates an estimate that, compared with prior law, section 53116 will reduce net Medicare spending for Part D by $11.8 billion over the 2018–2027 period…

However, CAGW, nor do other fiscally conservative groups, believe that net Medicare spending will be less.  In fact, we argued in the letter to Speaker Ryan that we believe the spending will be more because, “As insurers’ share of the cost is reduced, they will have little incentive to control costs while beneficiaries are in the coverage gap.  Once a beneficiary’s out-of-pocket spending moves into the catastrophic coverage benefit, the federal government bears 80 percent of the costs through a reinsurance program.  In the long run, therefore, the Part D changes could actually harm taxpayers.”

In other words, beneficiaries will move through the coverage gap much quicker due to less competition and higher drug costs.  Taxpayers will be saddled with the bill.

You can read our coalition letter here.

Other taxpayer groups expressed their concern here and here.

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