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Non-Interference Incoherence

Mon, Mar 04, 2013 | Peter Pitts

Congressman John Conyers just introduced a bill that, if passed, would create government-run health care here in the United States. This same proposal for a "single-payer" system has been put forth in every Congress since 2003, and like all of those previous bills, Conyers’ legislation is destined to die an unceremonious death.

Almost simultaneously, Senator Richard Durbin (D-Ill.) and Rep. Jan Schakowsky (D-Ill.) introduced into the U.S. Senate and House of Representatives versions of a bill that would require the HHS secretary to negotiate Medicare Part D drug prices with pharmaceutical manufacturers. The Medicare Prescription Drug Savings and Choice Act of 2013 would offer one or more Medicare-administered prescription drug plans to compete with the privately administered prescription drug plans currently offered under Medicare Part D. Durbin and Schakowsky have introduced versions of the bill in Congress at least three times since Part D came into effect in 2006.

But just because such brazen attempts at socialized medicine are doomed to fail doesn’t mean the threat of government-run healthcare isn’t real. In fact, the current push to allow federal price controls in the Medicare drug benefit, Part D, is a first step towards a single-payer system.

While Medicare as a whole is a fiscal basket case -- due to run out of money in 2024 -- Part D has been the very model of a well functioning federal program since its implementation in 2006.

The Congressional Budget Office (CBO) found that, between 2004 and 2013, Part D will cost an extraordinary 45 percent below what was initially estimated. Premiums for the program, meanwhile, are roughly half of the government’s original projections. Part D enrollees pay, on average, $30 a month -- a rate that has remained essentially unchanged for years.

It’s no wonder that beneficiaries are so pleased with the program. In fact, 96 percent of those enrolled in Part D say that their coverage works well.

These unprecedented results are largely due to Part D’s market-based structure. Beneficiaries are free to choose from a slate of private drug coverage plans, forcing insurers to compete to offer the best options to American seniors. It’s hardly surprising that the program has led to low prices and satisfied customers.

Of course, anywhere there are market principles at work creating value for consumers, there are liberals eager to meddle -- and Part D is no exception. First, President Obama promised to dismantle Part D in the State of the Union with his proposal to “reduce taxpayer subsidies to prescription drug companies.” This was his coded way of saying that he intends to ruin one of the best market-based government programs in history.

And now, Minnesota Senator Amy Klobuchar has introduced a bill that makes good on the president’s promise. The legislation would allow the Department of Health and Human Services to negotiate directly with drug companies in order to set prices under Part D. The bill would repeal Part D's “non-interference clause” that was included in the law specifically to stop HHS from distorting the market by strong-arming drug companies.

It’s hard to see Klobuchar’s bill as anything but a federal power grab. Unhappy that a single-payer system is a political loser, the president and his fellow liberals are content to takeover the health sector one reform at a time. After all, despite the Democrats’ false promises of cost-savings, there’s no reason to revoke the non-interference clause.

Through their own negotiations with drugmakers, private insurance plans that operate under Part D have already had great success in keeping pharmaceutical prices down. In fact, the CBO has observed that Part D plans have “secured rebates somewhat larger than the average rebates observed in commercial health plans.”

What’s more, the CBO has said time and again that doing away with the non-interference clause “would have a negligible effect on federal spending.” In a report from 2009, they reiterated this view, explaining that such a reform would “have little, if any, effect on [drug] prices.”

In fact, allowing the feds to negotiate drug prices under Part D would likely have a negative effect on the program. The CBO predicts that, when HHS forces pharmaceutical firms to lower the cost of a particular drug, this tactic brings with it “the threat of not allowing that drug to be prescribed.”

In other words, Democrats want to take a program that provides affordable medicine for millions of seniors, and reform it in a way that limits drug access without saving money or addressing any of the systemic problems that afflict Medicare.

As Mr. Conyers’ bill demonstrates, Democrats will never succeed in creating a single-payer system by passing one, all-encompassing bill. Instead, liberals in Washington will have to take over the health sector bit by bit. The push to impose Part D price controls is the latest attempt to grab a little more power for the federal government. Those who support a healthcare system that benefits from choice and competition have a lot to be concerned about.