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Democrats’ Medicare Standoff

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What You Need to Know

  • Savings on Medicare drug spending could pay for other items.
  • Democrats appear to disagree about how to cut Medicare drug spending.
  • That conflict could limit the size of the final social spending package.

Sometimes watching the legislative process can be confusing. The current budget reconciliation process certainly looks confusing.

However, if you look closely there are a few sign posts to watch for Medicare expansion and drug negotiations.

What we know at this writing, is that the policy fight between moderate and progressive Democrats about the big social spending package will mean that bold, expansive action on these two elements, is not likely.

In addition, Democrats expected to pay for Medicaid and Medicare expansions, and extend the premium subsidies that assist middle-income individuals and families purchase insurance with savings from drug negotiations.

So how the drug negotiation provisions end up, could shape the three other health care initiatives.

Drug Negotiations

Allowing the government to negotiate for drug prices has had a 20-year tortured history. It became a battle cry after the passage of the Medicare Part D prescription drug benefit.

Sen. Ron Wyden, D-Ore., was instrumental in the design and passage of the Medicare drug benefit. He also was one of the first members of Congress to introduce a bill to allow the government to negotiate drug prices for Medicare patients, shortly after the drug benefit was passed.

Now Wyden is chairman of the Senate Finance Committee, the committee with jurisdiction over the issue in the Senate. He would be aware of three facts:

  • Moments to pass truly game changing legislation like drug negotiations are fleeting, and now may be the time that Congress allows some form of drug negotiations.
  • R. 3, the House proposal that would allow negotiations of up to 250 Part D drugs, among other provisions, achieves $500 billion in savings. Even if this provision is pared down, its savings are needed.
  • With paper thin margins, it takes only one senator and only three House members to derail a provision.

Wyden has pointed out that often when there is a congressional change in a program the private sector finds a way to benefit without specific statutory authority to allow them to do so. Under that logic, if Medicare were provided some authority, the assumption would be the private sector can find a way to benefit from those rates for their plans.

Friction

One Democratic senator reportedly does not appear to have the same view of drug negotiations that other Democrats have. That is Kristen Sinema of Arizona. Finding a way for her to support something in this area will be crucial.

More on this topic

In the House, the Ways and Means Committee included the sweeping reforms of H.R. 3 in its budget reconciliation package. The House Energy and Commerce committee which also has jurisdiction did not because of three members on the committee who opposed the broader authority. Those members, however, do support drug negotiations, just in a more limited fashion. Two of those members introduced legislation to allow Medicare to negotiate for Part B drugs for which the exclusivity has expired and there is no competition.

Broad v. Limited

While lowering drug prices is popular with the public, it is unlikely that broad sweeping authority to negotiate for Medicare and private sector will pass. It is more likely that such a provision will be limited. Then we will spend the next couple of decades trying to decide if it worked or harmed innovation.

Limited authority means more limited savings, and that will have a ripple effect on what else can be included in the reconciliation package because so much of the health provisions were reliant on the savings from drug negotiations.

Medicare Expansion

With Democrats split between wanting a Medicare benefit expansion and filling the gap for 4.4 million Americans in the 12 states that have yet to expand Medicaid, both options are dependent on the savings from drug negotiations and other pricing reforms to pay for these initiatives.

Some argue that many seniors already can receive hearing, vision and dental benefits from Medicare Advantage plans or through Medicaid if they are eligible. The way in which the House constructed the expansion, there would be an immediate vision benefit, hearing added in 2023 and dental in 2023.

The states that have not expanded Medicaid are largely in the South and are not states that have elected Democrats in the past. The exception is Georgia, which sent two Democratic senators who are important to holding the majority.

How will this impasse be solved? It is clear with a slimmed down drug negotiations provision, there will not be the funds to do both plus an extension of the premium subsidies for middle-income individuals.

There may be an effort to make a “down payment” toward a Medicare benefit expansion, which is popular in the polls, while trying to do something to address the Medicaid gap. It will all depend on the amount of savings Congress can achieve.


Stephanie A. KennanStephanie A. Kennan is senior vice president, federal public affairs at McGuireWoods Consulting. She has been part of most major pieces of Medicare and Medicaid legislation passed in the last 25 years, either as a congressional staffer or while representing clients before Congress and the administration. She also represents clients on matters before the Centers for Medicare and Medicaid Services and other agencies within the U.S. Department of Health and Human Services.