Insight, analysis & opinion from Joe Paduda

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Aug
15

Paul Ryan’s evolving stance on deficits and Medicare spending

Rep Ryan has taken what, by any definition, is a very bold and aggressive position regarding Medicare. He has – quite rightly – acknowledged that Medicare’s current financial trajectory is unsustainable. While one can argue with Ryan’s solution, one cannot disagree with the diagnosis.
He has also been in the forefront of the deficit debate, again rightly describing the fiscal disaster that awaits if we fail to control entitlement spending.
Paul Ryan’s faith in the free market is obvious, and is evident in his approach to resolving the Medicare cost problem.
One of the tenets of that faith in the free market is that better/cheaper products and services will win out over costlier/less effective alternatives. The thinking is, over time consumers will force suppliers to improve their products and reduce the cost of those products.
Unfortunately, Ryan has specifically voted against basing payment on a product’s effectiveness, and in so doing, has undoubtedly helped increase medical costs while not improving outcomes.
I’m referring to the Medicare Modernization Act of 2003, which Rep Ryan supported.
MMA does not allow CMS to alter reimbursement on the basis of efficacy.
If a new drug or device comes on the market and is only 1 percent as effective as the existing drug or device, CMS cannot consider that effectiveness when determining reimbursement.
Here’s how the Kaiser Foundation described it:
“The Centers for Medicare and Medicaid Services (CMS) was precluded by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) from incorporating results from the comparative effectiveness [CE] research authorized under MMA into its coverage decisions for Medicare.”
The pertinent language from the Act reads as follows – CMS will pay for items or services “reasonable and necessary for the diagnosis and treatment of illness or injury or to improve the functioning of a malformed body member” (Fed Reg 65-95, p 31124- 31129, 2003 MMA); there is no mention of cost).
So, we taxpayers funded CE research, yet the feds can’t use that to ensure our taxpayer dollars are spent appropriately. And they can’t because the people who voted for MMA – including Paul Ryan – forbade it.
There’s more.
One of the other impacts of the Medicare Modernization Act was the reclassification of 6.2 million Medicaid recipients; low-income elderly and disabled people who had been receiving drug coverage through Medicaid were moved into Part D, where they got the same drugs, just at higher prices.
Medicaid negotiates with manufacturers and gets about a 26% price cut, under MMA Medicare is prohibited from doing so, so we taxpayers only get about 8 points off the cost. As a result of this language in the Act, pharma’s profits increased a bit under $3 billion dollars per year – a direct transfer from taxpayers to private industry.
The difference between Rep Ryan’s avowed belief in the free market and laser-like focus on deficit reduction and his strong support for MMA is striking.
It isn’t just a difference, it is Jekyll-and-Hyde like.
The vote for MMA increased the deficit and eliminated pay for performance, while his current persona rails against that very behavior.


Joe Paduda is the principal of Health Strategy Associates

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