Budget-busting spending bill also wreaking havoc on drug market

After signing the March budget deal, President Trump told Congress, "I will never sign another bill like this again" – a "Christmas tree" full of perks for special interests negotiated in secret and then thrust on the public, rank-and-file lawmakers, and even the president as a fait accompli.

Problem is, a lot of damage has already been done.  For one thing, that bill spends a huge amount of money, putting our nation deeper into debt.

But Congress, in its recent spate of hasty spending bills, has enacted numerous policy changes, most of which are the type that lobbyists know to wait for some massive catchall bill to insert into, such that there's little debate on the matter, owing to the sheer number of subjects up for consideration in one legislative vehicle.

One of those is creating massive instability in the pharmaceutical drug market because it dramatically changed how the Medicare Part D program works, basically as a bailout to health insurance companies who are struggling to keep Obamacare markets afloat.

Under the previous version of the law, enacted under George W. Bush, drug companies, insurance companies, and enrollees had a 50-25-25 split.  The drug companies "paid for" 50 percent of Part D drugs with discounted prices, insurance companies 25 percent, and enrollees 25 percent via deductibles.

At first glance, this split may seem arbitrary, but it was the product of intense debate and negotiations.  Further, this structure has worked well in practice for over a decade, resulting in unprecedented savings to taxpayers.

You've heard of budget shortfalls.  Have you ever encountered a cost shortfall?  Part D came in over 40 percent under budget in its first decade.  By government standards, that's like feeding 5,000 people with five loaves of bread and two fish. 

The "secret" to Part D's success is carefully balanced incentives that harness competition and profit motive to improve quality and cut costs, much as the free market does in thousands of other sectors every day.

This is not something that's easily obtained, but it is easily squandered.  How many other attempts to reform health care policy have ended in utter failure?  Pretty much all of them.  Here is one oasis of success in a desert of failure, and Congress has put its demise in motion.  And for what?  Is there some important priority justifying this change?  Only if you believe that keeping Obamacare afloat is important.

Congress changed the 50-25-25 split to a 70-5-25 split, swapping most of the insurance companies' obligations on the drug companies.  Not only is this a terrible way to create policy, since the change was preceded by exactly zero public debate, but it destroys the balance of the previous incentive structure, decreasing the insurance companies' "skin in the game" by 80 percent.

Insurers sought this change as a thinly veiled Obamacare bailout.  Facing deteriorating state markets and rising costs, the insurers had initially sought an actual, above-board bailout.  When that failed, welching on their Part D costs became Plan B.

Unfortunately, there are a sufficient number of (sufficiently powerful) Republican lawmakers to heed the self-serving wishes of an industry that was the single biggest cheerleader for enacting Obamacare in the first place.

The travesty is compounded by the fact that Part D is one of the only price-based programs in the government's sprawling health care empire.  Until this change, it had been the best hope that reforming the entitlement programs that threaten to drown the nation in debt is politically sustainable.

For all these reasons, Trump should lead Congress not just in preventing future such disasters, but in rolling back this one.  This was a grave mistake.  It can and should be reversed before the damage done is permanent.

 Gary S. Goldman is the nationally recognized host of Business, Politics, & Lifestyles, a weekly talk show airing on WCRN 830 in Metro Boston, Mass.  Learn more at garyonbpl.com 

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