HEALTH CARE/Joan Retsinas

Medicare Part D: Rethinking Public-Private Partnership

Behold the griffin. It blended an eagle’s head with a lion’s rear – combining the strengths of each, to forge a guardian of ancient treasure.

Twenty-first century America has its own griffin — “public-private partnerships.” We happily blend government with industry. Uncle Sam contributes a reservoir of money, a vast market, and protective regulations, like patents. The private sector contributes expertise, efficiency, and entrepreneurial savvy. We avoid the bureaucratic stodginess of government, while marshaling its strengths to fuel entrepreneurs who know how “to get the job done.” Capitalism and government: not opposed, but allied. As for which part of this beast will bear the risk of the government-fueled enterprise, that is a negotiation settled in fine-print legalese.

We laud this griffin. What is good for General Motors may or may not be good for the country, and vice versa, but we believe it. At least we want to believe it. We gain a mid-path, between socialism and laissez faire capitalism. We have created a truly American beast.

Congress has crafted public-private partnerships for a host of purposes: housing, social services, nursing homes, prisons, and, most recently, the Affordable Care Act. This Act did not make Uncle Sam the Great Insurer, as Medicare did. Instead, citizens under age 65 enroll in a privately-run, often for-profit insurance plan. Humana, United, Blue Cross, Aetna – they have partnered with Uncle Sam under the rubric of the Affordable Care Act. Ironically, even though conservatives now rail against Obamacare, the Act drew its inspiration from a plan set forth by the conservative Heritage Foundation.

Liberals may lament that we should have simply extended Medicare. Logistically that would have been the simplest: under Medicaid and the subsequent Children’s Health programs, Uncle Sam was already footing much of the bill for children anyway. Plus government (federal, state, local) insured its workforces. The idea was not bizarre.

But pragmatism triumphed: the Affordable Care Act was the plan that made its way through the Congressional thicket. The private sector accepted it; indeed, insurers saw an expanded market. Without that support, no plan would have passed. And today, as new enrollees see their co-payments, their deductibles, and their premiums rise, they recognize the dual benefits: on the one hand, they have insurance; on the other hand, the insurers profited.

On to Medicare Part D, the drug benefit. Here Congress forged another public-private partnership. Originally, Medicare did not cover prescription medications. Over time, enrollees who had been covered under their employers’ plans watched in dismay when, as retirees, they learned that Medicare wouldn’t pay for medications, which were growing increasingly necessary, increasingly expensive. The result: some states helped seniors, depending on their income, their disease, their drugs. Some people looked to Canada (and farther overseas) for cheaper medications.

Part D, created in 2003, addressed the crisis. The “doughnut hole” (now shrunken) left people with major expenses, but spared them the catastrophic ones.

Yet this partnership was skewed from the start. Congress barred the government, which foots the bill, from negotiating with the pharmaceutical companies over price. In contrast, state Medicaid offices, the Veterans Administration, and private insurers negotiate over price. So do Canada, Japan, and Western European countries. The 1,000-page Part D bill, signed at 3 in the morning, created not a wondrous griffin, but a budgetary monster.

Researchers (many working under publicly-funded programs) have developed astounding drugs. And pharmaceutical companies have priced them accordingly. Americans pay 40% more per capita on drugs than Canadians, 75% more than Japanese citizens, and three times as much as Danes.

We’ve heard about Martin Shkreli’s decision to boost the cost of a pill to treat a parasitic infection from $13.50 to $750. Outside the news are Folotyn and Soliris (regimens at $320,000 a year), with Glybera, approved in the European Union, but not yet in the United States, costing $1.2.million a year, waiting in the wings.

The budget forecast a 30% increase in Medicare Part D payments, from $63.3 billion in 2015 to $82.5 billion in 2016. Enrollees face restricted formularies, needs for prior authorizations, higher co-payments.

This spring President Obama proposed to allow Medicare to negotiate over price. Since the government paid the bill, it makes sense. Yet Republican legislators, who value the pharmaceutical industry’s entrepreneurial know-how, as well as its campaign coffers (companies’ lobbying budgets soared this past year) demur.

In 2016 we will elect a new President. Let’s ask candidates whether they will redesign this griffin to make it work for taxpayers.

Joan Retsinas is a sociologist who writes about health care in Providence, R.I. Email

From The Progressive Populist, February 1, 2016

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