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November 26, 2012 10:32 AM Medicare Part D in the Fiscal Cliff Negotiations

By Mark Kleiman

Republicans are floating three ideas to make cuts to the Affordable Care Act as part of a fiscal deal. Since they’re Republicans, all of the ideas they’re floating are horrible: less money for community health and prevention (because sicker is better), cutting the subsidies (because the middle class needs another financial hit right now) and slicing into the Center for Medicare and Medicaid Innovation (because it’s essential to maintain all of the existing inefficiencies in health-care delivery).

So here’s an alternative. I’m not enough of a health-policy wonk to know exactly how many tens of billions of dollars a year it would save, but the answer is “a bunch.” Allow the government to negotiate with pharmaceutical companies for discounts under Medicare Part D, just as every other large buyer of pharmaceuticals – health insurers and health-care systems – does. The only reason that doesn’t happen now is that Bush the Lesser and some of his Congressional buddies were in the pocket of Big Pharma, and wrote a specific ban on the practice into the law.

What was done by law can be changed by law. The administration of such a program would be complex, but the legislation would be simple, and the savings immediate.

Footnote I agree with commenters a previous post that the fiscal cliff is entirely an artificial, political problem. But that doesn’t make it an imaginary problem.

And there is a genuine underlying fiscal issue. In the short term, we need fiscal stimulus to get the economy back on track. But in the longer term we can’t keep spending more than 20% of GDP in federal programs and taking less than 20% of GDP in federal taxes. There are lots of good places to get revenue (carbon taxes, other pollution taxes, spectrum fees, financial-transactions taxes), and several places to make beneficial cuts, not because we’re “borrowing from China” but because we’re wasting money and in some cases doing active damage: e.g., defense, agriculture, ethanol, water projects. There are also obvious places where we could usefully spend more money (e.g., research, early childhood education, lead removal, paying federal civil servants enough to compete for top talent, replacing regressive state and local taxation). Not urgent, but important.

[Cross-posted at The Reality-based Community]

Mark Kleiman is a professor of public policy at the University of California Los Angeles.