September 25, 2009 – It’s all about lowering costs and providing universal and better health care for Americans. So why is it that a proposal to shift so-called dual eligibles from Medicare to Medicaid – a $86 billion saving to the government over 10 years – was voted down by Democrats who had long pushed for such a policy change?
Sen. Bill Nelson (D-Fla.) introduced an amendment Tuesday to the Senate Finance Committee health reform bill that would have allowed the government to purchase drugs at the lower Medicaid rate for more than 8 million low-income Americans eligible both for Medicare and Medicare. Since Congress enacted the Medicare Part D prescription drug program in 2003, the government has been required to pay non-rebatable Medicare rates for such patients.
So it made sense, Sen. Nelson reasoned, to just shift dual eligibles to Medicaid, which requires manufacturers to pay an automatic 15.1-percent rebate on the drugs they furnish to the program. Except, the government’s saving would have come at the back of the pharmaceutical industry, which had already pledged $80 billion toward health care reform over 10 years. And that’s where the buck stopped Thursday.
Rather than risking that industry walk away from the table, the Senate Finance Committee voted down Sen. Nelson’s amendment. This in spite of the fact that the Nelson amendment called for using $56 billion of the savings to close the much-maligned Part D donut hole – and even though the non-partisan Congressional Budget Office (CBO) had just reported that the industry’s plan to offer a 50-percent discount on brand-name drugs to seniors in the donut hole would cost the government a whopping $17.4 billion over the decade.
One of the three Democrats who voted with Republicans to defeat the amendment, Sen. Tom Carper of Delaware, told the Associated Press that although drug makers had not threatened to break the reform deal if the amendment passed, it was his expectation that they would. If he were in their shoes, Carper told the news agency, “I’d say, ‘Take a hike.’ ”
CBO: PhRMA Deal Costly
The fiscal research arm of Congress, CBO has been scoring the various health care reform proposals to determine their impact on the federal budget. The agency’s Sept. 16 report vindicated those who had been critical of the deal the White House and leading Democrats struck last spring with Pharmaceutical Research and Manufacturers of America (PhRMA).
They noted that the industry’s offer to give seniors in the donut hole a 50-percent discount on branded drugs could move patients away from cheaper generics. This would cost the government more once such patients move out of the coverage gap and the government picks up 95 percent of the cost – while increasing company sales of such higher-priced drugs. In its report, the CBO appears to concur.
In a long table of budget scores, the agency says under the heading “Improving Coverage in the Part D Coverage Gap” that the PhRMA deal would, in fact, cost taxpayers $17.4 billion between 2010 and 2019.
Huge savings ignored, PhRMA says
But PhRMA Vice President Ken Johnson told media this week that CBO failed to take into account savings realized when seniors stay on their medication, and out of the hospital. By making drugs more affordable, the industry is, in effect, saving the nation $100 billion in avoided hospital care, he said.
Either way, keeping dual eligibles on Medicare and the donut hole in place appears to have been the price Democrats had to pay to keep health care reform alive. They knew that the Nelson amendment would jeopardize the fragile coalition they had formed with the drug industry, and that reform may not be able to withstand a multi-million-dollar industry campaign aimed at killing reform – should PhRMA walk.