Trump Fixes a Biden Medicare Trick
WSJ OPINION
As Democratic officials start to feel a nagging worry about the far-left candidates winning their party primaries, they’re again accusing Republicans of pushing granny off a cliff. “President Trump is cutting important Medicare funding, raising prescription drug costs for millions of Americans,” retiring Michigan Sen. Gary Peters wrote Wednesday, amid Abdul El-Sayed’s primary victory.
Not true. Remember how Democrats used supposed savings from nationalizing student loans to pay for ObamaCare? Mr. Peters was alluding to a similar fiscal trick, which is resulting in more than half a trillion dollars in higher Medicare costs for seniors and taxpayers.
The Trump Administration revealed this month it plans to end a subsidy for Medicare Part D insurers. The Biden team established the subsidy to stop plan premiums from rising before the 2024 election as a result of the Inflation Reduction Act. Here’s what is really going on.
The IRA, which Democrats passed on a partisan vote in 2022, let Medicare officials engage in putative negotiations with drug makers. These were de facto price controls, since the penalty for rejecting the government’s “offer” was a 1,900% excise tax on the drug’s daily sales.
The law also required drug makers to pay the government rebates on medicines prescribed to seniors if their prices increase faster than inflation. Democrats claimed the “savings” from these two provisions would pay for enhancements in Medicare Part D, including elimination of the coverage “donut” hole and a $2,100 annual cap on out-of-pocket costs.
These benefit enhancements have turned out to be much more expensive than Democrats and the Congressional Budget Office claimed. CBO in February quietly raised the baseline cost of the Part D program by roughly $700 billion through 2035, citing the Part D design as a leading driver. That’s a nearly 50% increase.
The Biden team panicked in the summer of 2024 when insurer bids for providing basic Part D benefits for the following year came in higher than expected—spiking to $179.45 a month on average, from $64.28 in 2024 and $34.71 in 2023. Biden officials then established a “demonstration” project to subsidize insurers to keep down premiums to avoid an October Part D surprise.
Federal law allows the Centers for Medicare and Medicaid Services to set up such demonstrations to test new payment models, though they are supposed to be small-scale and seek to save money. The Biden subsidy wasn’t an experiment, and it cost $6 billion that year.
The Trump team last year reduced the subsidy and last week announced it will end it after discovering a couple of large insurers had gamed program rules by increasing plan bids to squeeze bigger federal payments. The subsidies were distorting prices and competition in the Part D market.
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