A Bush Success (not that he gets credit)
CaPretta, James C. & WEHNER, PETER
A Bush Success (not that he gets credit) The Medicare drug benefi t is working better than predicted. BY JAMES C. CAPRETTA & PETER WEHNER The protracted political struggle over the future of...
...The governmentalists were right about one thing: The new drug benefi t is unquestionably designed to encourage market competition...
...For liberals it is that the greatest threat to public support for their ideology is reality...
...On all these points, the governmentalists were wrong...
...BY JAMES C. CAPRETTA & PETER WEHNER The protracted political struggle over the future of American health care stems in large part from a fundamental disagreement over what should be done to address the seemingly inexorable rise in costs...
...Many fiscal conservatives— including Senator John McCain— opposed the drug benefit because of its undeniably high cost—$49 billion last year...
...Medicare benefi ciaries choose every year from among competing, privately run drug-coverage plans...
...Costs would soar without government-set price controls...
...The best approach is to gradually introduce markets and individual choice and ownership without threatening the security of the known...
...The government’s contribution toward this coverage is set at a fi xed percentage of the average premium, and no more...
...Benefi ciaries wouldn’t sign up because the premiums would be too high...
...But conservatives should also see that broader Medicare change is now more plausible because the public has seen competition work in the drug plan...
...The program’s competitive design is holding down costs for the government as well...
...But on everything else, they were mistaken...
...Now in its third year, the drug benefi t is working better than predicted...
...Still, the governmentalists found this design wanting and predicted failure...
...The drug benefi t’s market-based tilt is not complicated...
...There is plenty of evidence from around the world to show what would happen in the United States if a federal agency were given this kind of power...
...Of course, all the while, governmentalists opposed every effort to give market forces a chance to work...
...This is an unprecedented achievement in health care policy...
...Is there a better way—one that would improve effi ciency and slow cost escalation while encouraging higher quality care and medical breakthroughs...
...The Centers for Medicare and Medicaid Services announced earlier this year the new drug benefi t’s costs will be 40 percent James C. Capretta is a fellow and Peter Wehner is a senior fellow at the Ethics and Public Policy Center...
...More than 1,800 private plans are competing for enrollment...
...But a decade from now, the importance of the Medicare prescription drug benefi t’s groundbreaking success will be obvious to all, including conservatives...
...It’s been said that you can prove the possible by the actual— and in this case, the “actual” is that sensible public policy can liberate markets to work in health care just as they work in every other area...
...Politicians in these countries are under just as much pressure from a restless public as are American politicians to deliver a better product at lower prices...
...But that all changed with enactment of the Medicare prescription drug benefit...
...And little wonder: In 2008, the average benefi ciary premium is just $25 per month, well below the original estimate of $41...
...They argue that the only reliable way to control costs is heavy regulation...
...While congressional governmentalists, led by Senator Hillary Clinton, fi ercely opposed the bill’s passage because it included the introduction of unprecedented levels of competition, the bill passed in December 2003...
...If benefi ciaries want to enroll in a plan that costs more than the average, they can do so—but they, not the government, must pay the additional premium...
...There are important lessons to draw from this experience...
...The public will always be uneasy with abrupt changes to arrangements upon which many are dependent...
...Drug plans that fail to cut costs risk losing enrollment to cheaper competitors...
...Recent independent surveys show 85 percent are satisfi ed with their coverage...
...Pro-market reformers, on the other hand, need only to test their propositions against reality...
...Pro-market reformers have long contended that, with the right policies, health care could operate more like other sectors of the economy, with strong price and quality competition rewarding those market participants who improved productivity while also satisfying the consumer...
...On one side of the debate are the governmentalists...
...Those concerns were legitimate, and it remains true that the rest of Medicare needs signifi cant reform...
...More important, Medicare benefi ciaries like the program...
...Capretta is also a consultant to health insurers and drug manufacturers...
...or $244 billion—less over ten years than originally projected...
...Their argument was that private insurers wouldn’t offer coverage, so the price competition would be weak...
...It will rank as one of George W. Bush’s best domestic legacies...
...The program would collapse under the weight of a public yearning for government-run simplicity...
...Governmentalists have a deep interest in grounding policy debates on issues like health care in abstractions and appeals to fear of the unknown...
...They would use the government’s power to set prices for services below market rates and to impose restrictions on total spending, both of which would effectively limit the number of willing suppliers of services (doctors, nurses, hospitals, clinics, and product manufacturers...
...For conservatives, there is a need to accept the reality of measured steps in health and entitlement reform...
...We won’t get to where we need to be in health care all at once...
...In Europe and Canada, costs are unquestionably lower than here...
...To his credit, President Bush recognized early on that adding a new drug benefi t to Medicare presented a rare opportunity to introduce competition into the program, and he seized it...
...For years, governmentalists have been able to dismiss the arguments of market reformers as nothing more than theoretical dreaming, with insuffi cient real-world evidence to back up the claims...
...Yet waiting lists, outright rationing of care, quality problems, and general patient dissatisfaction are widespread...
...This structure provides strong incentives for the drug coverage plans to secure discounts from manufacturers and encourage use of lower cost products over more expensive alternatives...
Vol. 13 • April 2008 • No. 31
