The Washington Post weighs in this morning with a front page article headlined “Success of Drug Plan Challenges Democrats.” The article suggests that the success of the Medicare Part D program in controlling drug costs through insurer negotiations and its popularity with seniors creates an impediment to incoming House Speaker Nancy Pelosi’s plan to change the Medicare Part D law to permit the Government to directly negotiate prices with drug manufacturers for Part D covered drugs.
In my opinion, Government negotiations is a misnomer in the health care context. The Government does not negotiate prices; it sets prices by law. That is what happens with Medicare Part A (Prospective Payment System/DRGs), Medicare Part B (RBRVS), and Veterans Administration and Defense Department drug programs (Federal Supply Schedule) . Lower prices for the Government may benefit taxpayers, but they also shift costs onto private sector health plans and the same taxpayers who participate in those plans or sponsor those plans as employers.
The Post article mentions a couple of other alternatives to Representative Pelosi’s plan:
Rep. Fortney “Pete” Stark (D-Calif.), who is in line to become chairman of a key health subcommittee, said he prefers a middle path, with Medicare setting ceilings from which private insurers could negotiate downward.But Sen. Max Baucus (D-Mont.), the incoming Senate Finance chairman, is cool to the idea of government negotiation, and has committed only to holding hearings to “determine what the result would be of eliminating” the no-negotiation clause.