The Washington Post is going out all out to try to convince readers that the Medicare drug plan is just as good as it gets. Today it tells readers (in a news story) that "Experts Fault House Bill on Medicare Drug Prices," and goes on to muster every argument it can, no matter how fallacious, that we will not be able to get lower drug prices than what the private insurers currently pay. Before getting to the gory details, it is worth noting that the Democrats are going about this in the most backward way. The obvious way to offer an efficient drug benefit would have been to have an add-on to the traditional Medicare plan. A comparable subsidy could have been paid to the private plans operating within Medicare. Stand alone drug insurance plans don't exist in the private sector and there is no reason to establish them within Medicare, except to make the insurance and drug industries happy -- not most people's top policy goals. But getting to the meat, the article tells us that Medicare could not possibly negotiate more favorable prices like the Veterans Administration, because that would require establishing a formulary of preferred drugs. The article then claims that this move would not be politically acceptable. Well, Washington politics often is more about semantics than substance and this is clearly one such case. Drugs that are not on the VA formulary are still available to VA patients, they just get charged higher prices, prices that are comparable to what the private insurers pay under Medicare. So, the Washington Post tells us that it's politically impossible for Medicare to establish a "formulary" that excludes many drugs. Can Medicare establish a list of "preferred drugs" that are available at substantially lower prices? Would the drug companies be willing to offer lower prices to be included on such a list for 43 million Medicare beneficiares? Or, put slightly differently, would the drug companies be willing to offer lower prices in order to avoid being excluded from such a list? The Post article also throws in a couple of cheap extras to help advance its agenda on this issue. It tells readers that one-quarter of VA beneficiaries are enrolled in Medicare Part D. Before anyone thinks that this is convincing evidence of the failings of the VA system, it is important to realize that this includes all the workers who get retiree health benefits and all the Medicare beneficiaries who get supplemental insurance. These plans recieve subsidies through Part D and therefore their beneficiaries are counted as being enrolled in the program. There has been no mass rejection of the VA system, these veterans simply have been categorized as being covered by Part D. Finally, the Post tells us that the VA system has much lower costs because most of its drugs are distributed through mail order while most Medicare beneficiaries get their drugs through retail pharmacies. Well Wal-Mart says that they are lying. Wal-Mart fills millions of prescriptions for $4 a piece. The cost of filling prescriptions in stores does not explain the gap between the prices paid under Medicare Part D and the VA. I know it's rude, but the Post has often felt the need to point out that the Economic Policy Institute, my former employer, received funding from organized labor. In the same vein, perhaps readers should know that the Post receives millions of dollars in advertising each year from the pharmaceutical industry -- just the facts.
--Dean Baker
