Phil Kerpen

Senate Democrats are finally beginning the process of writing a budget after four years of dereliction. They will almost certainly include some changes to Medicare, the largest driver of federal spending and debt. But unfortunately, there are indications that they intend to focus on the small piece of Medicare (10.6 percent in 2012) that is actually working well: the Medicare Part D prescription drug program.

The drug companies cut a deal with the White House early in Obama’s first term to provide the funding for pro-Obamacare TV commercials and street organizing in exchange for favorable treatment in that bill. But that’s the past, and now they are fair game. President Obama telegraphed it when he attacked drug companies in his State of the Union. And why not?

The idea that life-saving medicines are sold for a profit rather than given away as part of a humanitarian mission seems intuitively wrong to many Americans. So bashing drug companies is a great way to score political points. But it is a proven fact that the profit-motive is the most efficient and effective way to allocate resources ever devised. New miracle cures can cost billions of dollars to bring to market. Without a return on investment providing a return on capital that justifies those huge investments, many fewer cures will be developed and we’ll all be worse off.

I opposed the Medicare prescription drug benefit bill. It largely displaced a well-functioning private market and there were no offsetting spending cuts to pay for it. It created a huge new unfunded liability for federal taxpayers. But it did successfully avoid one of the biggest dangers in a large government-run prescription drug program: the temptation to dictate below-market prices and risk undermining the profit-motive that incentivizes the development of new cures.

It does that by relying on competing private plans. The plans compete intensely to sign up seniors. The incentives are aligned to avoid administrative waste and keep costs down, including negotiating for the best prices on drugs. An amazing 90 percent of seniors are satisfied with their coverage according to a recent survey.

The latest cost estimates from the Congressional Budget Office (CBO) show that over the next 10 years the program will spend 45 percent less than the original estimate. And the premiums paid by seniors are also much lower, about $30 per month for the past three years, which is less than half the original projection.


Phil Kerpen

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.