Three Progressive Ways to Reduce Medicare Costs

By Progressive Change Campaign Committee

17 December 12

orporate lobbyists and their allies on Capitol Hill have a terrible new idea: hiking the Medicare eligibility age from 65 to 67. This would save the federal government about $5.7 billion a year, but cost seniors $11.4 billion over the same period.

There are a better ways to cut Medicare costs, and they wouldn't cost a single penny of anyone's benefits. Here's three possible choices for how we can do that:

1. Empower Medicare To Negotiate For Lower Drug Prices: One policy option that would be very simple to enact and would not require any sort of increased spending or expansion of government would be to simply allow Medicare to use its bulk purchasing power to negotiate with drug makers for lower prices. The program is currently banned from doing so, thanks to the clout of the drug industry. Rep. Peter Welch (D-VT) estimates that doing this could save as much as $156 billion over 10 years.

2. Allow Drug Re-importation From Canada: One of the major costs in the U.S. health care system that drives up the costs not only in the private sector but also among Medicare are the costs of prescription drugs. One very easy was to greatly relieve this cost is to eliminate protectionist barriers and allow the free importation of prescription drugs from our neighbors like Canada. A failed measure proposed by Sens. Byron Dorgan (D-ND) and John McCain (R-AZ) to do exactly that in 2009 estimated that doing so would save consumers $80 billion over ten years.

3. Globalize Medicare: Another protectionist barrier and detriment to free trade in the U.S. health care system is that seniors currently aren't allowed to use their Medicare insurance system outside of the United States. An alternative to this would be to drop these trade barriers and allow seniors on Medicare to seek care abroad, where services are much cheaper. Economist Dean Baker estimates that if fifty percent of Medicare beneficiaries opted for this globalized option, then taxpayers would save more than $40 billion a year by 2020. President Obama has opposed this option in the past, but should re-examine it now.

Cynics may say that these policies have no chance of being implemented because of opposition from special interest groups like the big pharmaceutical companies. But we took a looked at how Congress has voted on just one of these issues - drug re-importation - and found that there is broad past support for it among both parties.

For example, 39 currently seated House Republicans voted in 2003 to allow for drug re-importation. Here's a list of these Republicans:

Reps. Rush Aderholt, Roscoe Bartlett, Bono Mack, Kevin Brady, Dan Burton, Shelly Moore Capito, John Culberson, John Duncan, Jo Ann Emerson, J. Randy Ford, Trent Franks, E. Scott Garrett, Bob Goodlatte, Doc Hastings, Jeb Hensarling, Walter Jones, Steve King, Jack Kingston, Steve LaTourette, Don Manzullo, Buck McKeon, John Mica, Candice Miller, Sue Myrick, Randy Neugebauer, Ron Paul, Tom Petri, Todd Russell Platts, Denny Rehberg, Dana Rohrabacher, Paul Ryan, James Sensenbrenner, Bill Shuster, Mike Simpson, Chris Smith, William Thornberry, Frank Wolf, Bill Young

Additionally, fifteen sitting Republican senators voted to allow for drug re-importation in a May 24th, 2012 vote. Here are their names:

Sens. John Boozman, Susan Collins, Jim DeMint, Lindsey Graham, Chuck Grassley, Dean Heller, Mike Lee, John McCain, Lisa Murkowski, Rand Paul, Jeff Sessions, Richard Shelby, Olympia Snowe, John Thune, Patrick Toomey, David Vitter

As you can see, at least on drug re-importation, there is plenty of Republican support for Democrats to enlist in order to pass this policy as part of an agreement.

Although some Democrats in the past have voted against re-importation, the White House says it is for it. In 2009, Obama adviser David Axelrod said it was a policy that the administration would support in the future. And let's not forget that Obama explicitly campaigned that in support of Medicare drug price negotiation. In a recent speech at the Center for American Progress, Sen. Dick Durbin (D-IL) also explicitly endorsed price negotiation.

If the White House is insisting on making cuts in Medicare spending, it should ask that Big Pharma shoulder these costs, not seniors relying on benefits. The way it could do this is by enlisting any of the three policy options above and rallying its own party and challenging the Republicans to cut payments to Big Pharma, not seniors' benefits.

Thanks to PCCC researcher Ethan Schwartz for research help on this post.