The Good, The Bad, And The Ugly Of Nancy Pelosi’s Drug Pricing Proposal

The Federalist | 9/12/2019 | Christopher Jacobs
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During the midterm election campaign, Democrats pledged to help lower prescription drug prices. Since regaining the House majority in January, the party has failed to achieve consensus on precise legislation to accomplish that objective.

However, on Monday a summary of proposals by House Speaker Nancy Pelosi (D-CA)—which became public via leaks from lobbyists, of course—provided an initial glimpse of the Democrat leadership’s policy approach. Party leaders claimed the leaked document describes an old legislative draft (they would say that, wouldn’t they?).

Contains - Numbers - Eg - Out-of-pocket - Threshold

Indeed, the summary contains several bracketed numbers (e.g., “the catastrophic out-of-pocket threshold would be set at $[X] in 2022”), suggesting staff continue to finalize details based on Congressional Budget Office cost estimates and other considerations. But the document allows conservatives to analyze the good, the bad, and the ugly of House Democrats’ potential approach.

Among other proposals, the Pelosi proposal would rearrange the current Part D prescription drug benefit, and “realign incentives to encourage more efficient management of drug spending.” Under current law, once beneficiaries pass through the Part D “doughnut hole” and into the Medicare catastrophic benefit, the federal government pays for 80 percent of beneficiaries’ costs, insurers pay for 15 percent, and beneficiaries pay for 5 percent.

Structure - Problems - First - Beneficiaries - Percent

This existing structure creates two problems. First, beneficiaries’ 5 percent exposure contains no limit, such that seniors with incredibly high drug spending could face out-of-pocket costs well into the thousands, or even tens of thousands, of dollars.

Second, the very generous 80 percent federal reinsurance subsidy in the catastrophic phase provides a perverse incentive for insurers to have their beneficiaries reach this benefit level, at which point they can shift most of their costs to the nation’s taxpayers. The Medicare Payment Advisory Commission (MedPAC) and others have documented how these incentives have caused a shift in Part D spending, with the federal government spending more...
(Excerpt) Read more at: The Federalist
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