Don’t give Medicare money for Obamacare

By Phil Kerpen • July 15, 2022 1:30 am

There were a lot of ingredients in the 2010 Republican electoral landslide. Perhaps the most significant was that by raiding $787 billion from Medicare to pay for Obamacare, Democrats gave the “Medicare cuts” club they had used to beat Republicans over the head for decades to their opponents, who then hammered away at them.

Remarkably, 12 years later Democrats may – in a last-ditch attempt to salvage something from the wreckage of Build Back Better – repeat the exact same mistake again.

This time the conceit is that they can drain $200 billion or more from Medicare prescription drug spending and somehow sell that to seniors politically by calling it “drug pricing reform” – then use that money to buy political support via more generous Obamacare subsidies.

The Democrats’ plan would impose price controls via a so-called negotiation in which the government would dictate the prices Medicare pays for drugs to manufacturers, who would face a tax of 95% of their total sales if they said no. A classic mob-style “offer you can’t refuse.”

Proponents pretend this is a free lunch, that seniors will have access to the same drugs at steeply lower prices. Reality doesn’t work that way.

Imposing price controls to siphon hundreds of billions of dollars out of Medicare prescription drug spending will clearly result in few new cures and treatments available to seniors. An analysis of an earlier version of the Democratic price control plan by University of Chicago researchers found that it would lead to between 167 and 324 fewer drugs being developed over the next two decades, with biopharmaceutical research and development spending reduced by more than a trillion dollars.

Meanwhile, the health insurance industry has been feasting on larger-than-ever Obamacare subsidies that were stuffed into President Biden’s $1.9 trillion “COVID relief” bill. The idea of fattening up subsidies when claims were at historic lows as people avoiding seeking health care during the pandemic never made sense, but Biden did it anyway.

Now the big insurance companies are in all-out lobbying blitz to get the expanded subsidies extended, claiming it is the only way to avoid sharp premium increases – even though health system utilization is still below 2019 levels as many people remain hesitant to go back to doctors and hospitals.

As in 2010, the insurance industry is relying on AARP – which makes more than a billion dollars per year in corporate royalties, mostly from UnitedHealth – to carry their public relations and lobbying water. The plan, clearly, is to drain money from Medicare drug spending to funnel it to the insurance companies.

The bet by Democrats would be that lower prices through “negotiation” is an easier to explain message in a campaign context than “price controls cause shortages.” Maybe so. But the Republican message could be much simpler than that. As simple as: “my opponent voted to drain hundreds of billions of dollars out of Medicare to spend on Obamacare.”

We’ve seen that one before. The result? Republican landslide.