Obama already used Medicare as a piggy bank for more government spending when he raided $716 billion to spend on Obamacare. Those brute force cuts mean below-market reimbursement rates that risk shortages of doctors, hospitals, and nursing homes. They are also unlikely to be effective fiscally, because when shortages become acute, political pressure will become irresistible to reverse them. Applying the same slash and burn philosophy to prescription drugs via rebates to pay for a fiscal cliff deal would repeat the same mistake.
Medicare Part D is the only entitlement program in history to come in with costs under its initial projections - 43 percent under, in fact. Premiums have remained low because plans compete for seniors, who have become sophisticated consumers - and because private plans use their purchasing power to negotiate rebates that are applied to premiums. If Medicare mandated its own rebates, as Obama is proposing, they would displace these private rebates and raise premiums for seniors 19.6 to 39.4 percent according to an analysis by former CBO director Douglas Holtz-Eakin.
Real Medicare reform would unleash the power of competition and choice by replacing the rest of Medicare's one-size-fits-all approach with a system that empowers seniors to choose between competing plans. That's precisely what Paul Ryan proposed, and it didn't prevent the Romney-Ryan ticket from scoring a 56-44 advantage among seniors on Election Day.
The politics of Medicare have changed. The American people now understand that resources are limited, and there will not be unlimited medical care for everyone forever. With that fantasy laid to rest, we have to choose either a model that relies on competition and choice or a model that empowers politicians and bureaucrats. Prescription drug rebates would be another step in the wrong direction.
Phil Kerpen is president of American Commitment, a columnist on Fox News Opinion, chairman of the Internet Freedom Coalition, and author of the 2011 book Democracy Denied.
American Commitment is dedicated to restoring and protecting America’s core commitment to free markets, economic growth, Constitutionally-limited government, property rights, and individual freedom.
Washingtonian magazine named Mr. Kerpen to their "Guest List" in 2008 and The Hill newspaper named Mr. Kerpen a "Top Grassroots Lobbyist" in 2011.
Mr. Kerpen's op-eds have run in newspapers across the country and he is a frequent radio and television commentator on economic growth issues.
Prior to joining American Commitment, Mr. Kerpen served as vice president for policy at Americans for Prosperity. Mr. Kerpen has also previously worked as an analyst and researcher for the Free Enterprise Fund, the Club for Growth, and the Cato Institute.
A native of Brooklyn, N.Y., Mr. Kerpen currently resides in Washington, D.C. with his wife Joanna and their daughter Lilly.