The Obama Administration's About-Face on Medicare

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03/12/2014

The Obama administration seems determined not to rock the boat before the midterm congressional election this fall.

It’s already delayed Obamacare mandates that could cause outrage. Now it has stopped proposed Medicare changes that weren’t even part of Obamacare—and with good reason.

The administration had proposed new rules for seniors’ prescription drug plans in Medicare Part D. This is significant because Part D is unusual for a government program:

People love it. Nearly 90 percent of beneficiaries are satisfied with their plans.
It’s cost-effective. The program’s cost is running 48 percent LOWER than originally estimated, and seniors’ premiums have been impressively stable.
It showcases the success of competition. Medicare is unwieldy and needs reform—and adding the prescription drug benefit expanded the program’s reach. But the reason it has worked better than expected is that privately run plans are competing for seniors’ business.

The administration’s proposed changes would upset the very factor that produces these results—choice.

Heritage experts Alyene Senger and Robert Moffit explain that the changes “would have inflicted serious damage on seniors’ Medicare Part D benefits.” One of the proposed changes would have restricted the number of prescription drug plans an insurer could offer, which would decrease the choices available to seniors.

The administration argued that less choice would help seniors, because having too many options could be “confusing.”

The result of this change: More insurance plans would be cancelled. One study estimated that about 7.4 million Medicare beneficiaries would be affected by either cancellations or changes to their plans.

So it’s no surprise that this proposal was unpopular. Senger and Moffit said:

Bottom line: The administration’s effort to cancel or reduce Part D plans was no more popular than its policy to cancel plans or reduce competition in the commercial health insurance markets. As the administration reevaluates the rules, it would be wise to avoid the same mistakes as the original plan.

While the changes have been dropped for now, Administrator Marilyn Tavenner of the Centers for Medicare and Medicaid Services indicates they could be back.

"Given the complexities of these issues and stakeholder input, we do not plan to finalize these proposals at this time. We will engage in further stakeholder input before advancing some or all of the changes in these areas in future years," she wrote to Congress on Monday.

This is yet another example of government going in the wrong direction on health care. It would be much better if lawmakers pursued health reforms that increased choice for Americans instead.

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