Freedom Line Blog

Medicare Part D is a good model for the Ryan Medicare plan.

To be clear up front: Congress was wrong to pass Medicare Part D, the prescription drug program, without more broadly reforming Medicare. As a new entitlement, it is extremely costly, and has exacerbated the government’s debt problem.

That said, the free-market aspects of the plan — the private-sector competition part of it, without a government option — have worked beyond almost the wildest dreams of free marketers.  The liberals were so sure that costs to seniors and the government would rise astronomically without government there to “negotiate” premium” prices that they originally proposed to have government “set” the premium price at $35 with a built-in hike each year for inflation. Lo and behold, in the third year of the program it turned out that the average premium price was still down below $25, ten dollars less than what the libs had wanted to set as the base price. In other words, competition worked to keep prices about 30% lower than government planners had predicted.  What the libs wanted as a limit would instead have been a huge burden.  When the libs in 2007 tried desperately to append a government “negotiation” provision to the program, the attempt was filibustered to death in large part based on those amazing early results.  Thank goodness. Competition, as usual, had worked wonders, and it was not to be messed with — which is why the Dems made no serious attempts thereafter to force the government negotiation option back onto the table. Even four years later, the average premium still is $30, or five dollars below what the libs assumed could be achieved only by government intervention.

It is true that some people have cherry-picked statistics to claim that premiums are skyrocketing, but that’s only because they pick the sorts of plans whose costs have risen, not the average of all plans. James Capretta explains it well today at NRO.

Meanwhile, as Capretta explains, the cost to government — meaning to you and I, Joe Taxpayers — is a whopping 31% less than had been projected. Now, granted, that’s still a ton of money that should not have been spent unless it was part of a larger Medicare overhaul that used competition to save money on the rest of the program as well, but even so, the overall lower costs are a tribute to the virtues of competition.

Moreover, as Rick Santorum explained in the GOP presidential debate last week, the Medicare reforms in Rep. Paul Ryan’s budget proposal are based largely on the competitive aspects of Medicare Part D. They basically apply Part D’s system to all of Medicare — which means they could serve to produce a huge majority of seniors who are satisfied with the program, at a remarkably lower cost.

That’s why and how the Ryan plan can be politically sellable — because seniors happy with Part D can be expected to react at least somewhat favorably to a plan modeled on Part D, as long as the connection is made clear.