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Allow Real Competition in Medicare

POSTED BY Galen Institute on November 14, 2010.

The best way to get Medicare spending under control is to follow the model of a successful program that is actually costing less than expected: the Part D prescription drug benefit.

Medicare Part D was projected to cost $111.2 billion in 2009 under original estimates. But the most recent Medicare Trustees’ Report found that the benefit actually cost the federal government $60.8 billion last year.

What other program costs 45 percent less than projected? Experts attributed the lower cost to a slowing demand for prescription drugs, greater use of generics and fewer people signing up for the benefit. But the biggest reason is that the program uses a model of consumer choice and private competition to deliver the benefit.

The program is optional and beneficiaries can obtain the drug benefit by voluntarily purchasing insurance policies from private drug plans that are competing for their business or from private Medicare Advantage health plans. The plans compete to offer a variety of benefit structures and to provide the best value at the lowest prices. Medicare beneficiaries have proved to be savvy, value-conscious shoppers.

If we were to use the principles in Part D and apply them to more of Medicare, we might actually be able to bend the cost curve.

The first step for the new Congress should be to allow the popular Medicare Advantage plans to compete on price and value rather than slashing funding for them, as the new health overhaul law will do.

Posted on The New York Times: Room for Debate, Nov. 14, 2010.

Filed Under: Uncategorized

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