December 9, 2015
How Politics Drives Up Your MSA Costs
by Teddy Snyder
The bargaining that produced Medicare Part D in 2003 prevents MSAs and others from saving $16 billion a year. It's time that changed.
For President George W. Bush and Congress to get Medicare Part D drug coverage passed in 2003, they had to make significant concessions to big business, including the drug industry. One of the law’s provisions forbids the government from setting rules for negotiating better drug prices. The “noninterference” section says:
In order to promote competition . . . the secretary [of Health and Human Services]:
(1) may not interfere with the negotiations between drug manufacturers and pharmacies and PDP [prescription drug plan] sponsors; and
(2) may not require a particular formulary or institute a price structure for the reimbursement of covered Part D drugs.
42 USC 1395w-111(i)
The result, according to a new policy brief from the Carlton University School of Public Policy and Administration, is that Medicare Part D plans pay on average 73% more than Medicaid and 80% more than the Veterans Health Administration for brand-name drugs. If Part D plans could negotiate drug costs the way Medicaid and the VA do, savings could reach $16 billion a year.
The study shows that the average per capita expenditure by Americans for pharmaceuticals is more than double the average of 32 other industrialized nations. Contrary to their publicity, American drug companies do not devote the wealth gained from Part D on new research initiatives. Half of new medical research initiatives come from non-profit entities such as universities. Rather, drug companies have spent their millions in recent years on increased lobbying. If drug costs decreased, Medicare beneficiaries could expect Part D premiums to also decrease.
Although private insurers pay Part D medical expenses, workers’ compensation professionals are painfully aware that anticipated Part D-covered expenses must be included in a Medicare Set-Aside. The increased use and rising cost of pharmaceuticals has torpedoed many a proposed workers’ compensation buy-out. If the purpose of an MSA is to protect Medicare, why are Part D expenses that are paid by private insurers included in the allocation anyway?
Casualty insurance companies and the American Association for Justice are big political players. With the 2016 election cycle coming up, now would seem to be the time for their lobbyists to twist some arms to modify the noninterference provision for the benefit of all Americans.