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Even in Health Care, Competition Works

Even in Health Care, Competition Works

When it comes to government spending and America's healthcare system, it's rare to hear good news. But according to a recent report, the Medicare Prescription Drug Benefit is costing significantly less than originally estimated.
According to the Centers for Medicare and Medicaid Services (CMS) which administers the Medicare program, the average monthly premium for the standard Medicare drug benefit will cost seniors $28 in 2009. That's 37 percent lower than the $44 a month legislators predicted when the program was created in 2003.
While there was a great deal of criticism initially about adding a drug benefit to Medicare, Congress established a new model through an unprecedented partnership between private insurance plans and this public program. Participants can enroll in private drug plans offered by private insurers, but with oversight from Medicare officials.
Instead of the one-size-fits-all model typical of government health insurance, the Medicare drug benefit offers a wide range of choices. Seniors typically can choose from among 20 or more plans in their regions, including Medicare Advantage plans that integrate drug and medical coverage into one health plan.
Participants pick their own plan, based on their medical needs and coverage choices. Insurers compete for the business of seniors by offering the most generous benefits they can for the most affordable price. Many plans have sought market advantage by offering coverage in the dreaded "donut hole" so seniors aren't exposed to their full medical bills once they hit the coverage gap that Congress designed.
Competition and consumer choice are working to bring costs down. This is a testament to an essential truth of health reform: The market works.
CMS also reports that the total cost of the Medicare drug benefit in 2009 will be $46.4 billion -- substantially less than the initial estimate of $74 billion. And the 10-year cost estimate of the program has been revised down from $634 billion to about $395 billion - saving taxpayers almost $240 billion over original estimated costs.
Unbelievably, some lawmakers are pushing to abolish the Medicare drug benefit and replace it with a new system that would eliminate this competition and curtail enrollees' choices.
A bill recently introduced by Rep. Dennis Kucinich (D-OH), for instance, would scrap the successful drug benefit program, even though it has an 85 percent approval rating from seniors. Instead, Rep. Kuchinich's bill would allow Medicare to institute price controls on drugs and allow seniors to import drugs from abroad, despite the fact that imported meds easily could be fake, counterfeit, or contaminated.
This effort is dangerous and ignores the Medicare drug benefit's successes. The CMS report shows that private competition can bring down health costs while giving seniors more choices. Hopefully, both Sens. Barack Obama and John McCain are paying attention.

Grace-Marie Turner is president of the Galen Institute, a non-profit research organization focusing on free-market solutions to health reform. She can be reached at P.O. Box 320010, Alexandria, VA, or at

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