Healthcare: Comparing Drug Coverage in the Two Budget Proposals

Mr. Obama declared, We will cut spending on prescription drugs by using Medicare's purchasing power to drive greater efficiency. Meanwhile, Mr. Ryan held up the existing Medicare drug benefit — a program run through private insurance companies, under legislation that specifically prohibits Medicare from using its bargaining power — as an example of the efficiencies that could be gained from privatizing the whole system.

Mr. Obama has it right. Medicare Part D has been less expensive than expected, at least so far, but that's because overall prescription drug spending has fallen short of expectations, largely thanks to a dearth of new drugs and the growing use of generics. The right way to assess Part D is by comparing it with programs where the government is allowed to use its purchasing power. And such comparisons suggest that if there's any magic in privatization, it's the magical way it makes drug companies richer and taxpayers poorer. For example, the Department of Veterans Affairs pays about 40% less for drugs than the private plans in Part D.

Did I mention that Medicare Advantage, which closely resembles the privatized system that Republicans want to impose on all seniors, currently costs taxpayers 12% more per recipient than traditional Medicare?

For more, see Who's Serious Now? by Paul Krugman, April 14, 2011 at NYTimes.com.