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Tuesday, March 16, 2010

In Praise of Medicare Part D, Sort Of

Karl Rove sat down for an interview with the Heritage Foundation - he's selling a book, naturally.

He had the following to say about Medicare, Part D (prescription drug benefit):

I understand if a conservative says to me, ‘I think we ought to repeal Medicare and it ought to be gone. And I, therefore, object to a Medicare prescription drug benefit.’ I salute them as being consistent. But if Medicare is going to exist, then we need to have Medicare driven by market forces and we need to have it as modern as possible. …

It was a wise decision for conservatives to say, while we have this moment—a Republican President, a Republican House, a Republican Senate—let us pass a conservative, market-oriented version of this benefit, rather than allowing them to pass a much more expensive, much larger, big government, price-fixing form of service.

I believe the passage of Medicare Part D is playing a major part in explaining the opposition to Obamacare, and here's why:

Americans express by upwards of 75% general satisfaction with their healthcare insurance. I would submit that much of this satisfaction stems from the recent surge in the use of high deductible health care plans (with health savings accounts) that employers have begun offering in their benefit packages. As one example, my employer began offering these plans in 2009; more than half of the workforce selected the high deductible plan in 2010.

The widespread use of these HD/HSA plans was made possible only by the passage of the Medicare Modernization Act (MMA), the legislation under which the prescription drug benefit was established. HD/HSA plans were available prior to MMA's passage, but in very limited, restricted form. Language in the MMA stripped away these restrictions, thereby blowing the market for these HD/HSA plans wide open.

The MMA also increased payments to Medicare Advantage, the PPO alternative to traditional Part A & B. Almost all of the opposition to Obamacare among the older set comes from those enrolled in MA, who would see a gutting of the program under Obamacare.

Could either the HD/HSA legislation or the MA expansion have passed on a stand-alone basis? Perhaps, but not likely, considering the 60 vote requirement in the Senate. What you had was a tit-for-tat exchange - a modest bump in Medicare spending (~$15 billion/year) for game-changing, free-market health insurance reform measures. I think it was a reasonable exchange:

1. Medicare was going broke anyway - Medicare Part D was only going to change the date at which major reforms were required, not whether it needed reform.

2. As Rove suggests, repeal of Medicare was not going to happen anytime soon. The collapse of Social Security reform proves that point.

I also agree with a minor point he makes - if we're going to have a modern medical insurance program for seniors, it should have provisions for drug use.

So, I've never been one to get real exercised about the passage of Medicare Part D. I believe that conservatives derived significantly more benefit from the MMA than has been acknowledged or understood. And perhaps we're seeing the real benefit of the MMA right now, as the free-market reforms put in place by the MMA are stoking resistance to Obamacare.

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