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PHARMA/POLICY: Part D Costs–Shurely shome mistake, Ed?

An article called West ‘on verge of medical crisis’ on how health care is all screwed up in the UK conservative newspaper The Daily Telegraph has this rather interesting subheader.

Western nations are on the brink of a crisis in medical services, according to the man credited with curbing the rise in health care spending in America.

Given that health care costs in America have been rising fast for the last 40 years apart from a brief period in the mid-1990s, I was very keen to find out who this hidden genius was. I initially suspected that Mark McClellan would be a little surprised to find out what the Torygraph thinks he’s responsible for! But reading down in the article, it appears that the boaster is McClellan himself.

Dr McClellan has taken a leaf from the Altman book. After years in which the Medicare budget exceeded projections, he managed to keep drug spending 40 per cent below projections. This "unprecedented" improvement followed moves to encourage patients to take generic rather than brand-name prescription drugs. The key was information, giving patients the wherewithal to see for themselves that generic drugs were as effective as their pricey counterparts, he told the meeting. Dr McClellan has taken a leaf from the Altman book. After years in which the Medicare budget exceeded projections, he managed to keep drug spending 40 per cent below projections. This "unprecedented" improvement followed moves to encourage patients to take generic rather than brand-name prescription drugs. The key was information, giving patients the wherewithal to see for themselves that generic drugs were as effective as their pricey counterparts, he told the meeting.

So what he’s talking about is Medicare Part D. And now
he’s claiming that it’s coming at 40% below projections? I guess it
depends which projections you mean, as I explained last year in this piece over at TPMCafe when I picked up on similar revisionist history from Mike Leavitt.

As proof that privatization is already working, Leavitt points
to estimates that the program’s net cost to the federal government will
be $678 billion over 10 years, instead of the $737 billion projected
last year.

Funny that because this is what the PBS Newshour reported in March 2004

When the Medicare law was passed last November, Congress’s
scorekeeping arm, the Congressional Budget Office, pegged the cost at
$395 billion over ten years. Contrast that with the $534 billion
estimate from HHS’ Centers for Medicare and Medicaid Services, or CMS.
The Bush administration released that estimate last month as part of
its 2005 federal budget request.

So we’re not yet hitting some of the wilder estimates
of the program cost, and we’re only going to be (maybe) $280 billion
over the original budget promised, or a mere $140 billion over the real
estimate that was deemed so explosive that it was forcibly hidden from
Congress by Tom Scully, the Bush flack then running CMS. That must mean
that the whole thing is cheap and shows that the market is working! And
of course we can trust everything that these guys say, as in every
other aspect of their performance.

And the latest claims that McClellan is going on about are based off this press release from January 2007 that
claims that costs are 30% lower than projections. Of course it doesn’t
tell you the actual cost, or the projection that it’s 30% lower than.
And for that matter the damn date on the press release is wrong by a
year! So as I say, it’s a little hard to trust these guys. But after
some quick punting around I’ve found that there are no more recent than
2005 estimates for the program cost, and it’s not clear that the wilder
projections include the offsetting increases in premiums that CBO
included in its original 2003 numbers, which it hadn’t changed too much in 2005.

So I think the answer is that Part D is 40% or maybe 30%
less than some mythical number that Mike Leavitt and Mark McClellan
started using when the first number came in too low.

And by the way Families USA has pointed out that the price of the most used drugs in Part D is going up rather quickly.
That suggests that overall costs may not stay low in the future, unless
the insurers are making so much money on Medicare Advantage that
they’re happy to lose money on the standalone Part D plans.

So to me this all sounds like more revisionist history,
with the real “projections” rapidly getting lost in the sands of time.
And the architects of the plan—which remember was a complete
implementation screw-up, just not on a Katrina or Iraq level—are happy
to take credit.

Prize for anyone getting the reference in the headline.

 

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PeterMatthew HoltMichael D. Miller, MDSteveH Recent comment authors
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Peter
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Peter

“So as I say, it’s a little hard to trust these guys.”
What has this administration done to ever be trusted?

Matthew Holt
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Michael. Don’t tease us please! Can you let us know about the results of your study!
Matthew

Michael D. Miller, MD
Guest

There is lots of hyperbole going on with Part D costs. I did an apples-to-apples comparison of data and projections from the Congressional Budget Office, and actual Part D costs for 2006 were $3-4 billion less than their original projections, and their 2007 projections are 26% less than the one they issued in 2004, i.e. $136 billion less over the years 2007 to 2013.

SteveH
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SteveH

What! No claims that Medicare Advantage is saving the taxpayers money? McClellan will be moving on to claim that soon.