Recent news headlines report Republicans and Democrats, looking for “pay-fors” to offset the high cost of the bipartisan infrastructure deal, are considering eliminating President Trump’s Medicare rebate rule. But since the rule has never been implemented, there are no “savings” to claim.
Welcome to budget shenanigans the Washington Way.
As Juniper Research Group CEO and health care and budget expert Chris Jacobs writes in The Federalist, “Congress now wants to repeal a rule that 1) hasn’t gone into effect and 2) likely won’t ever go into effect, so it can take the phony savings’ associated with repealing something that won’t happen anyway and use it to ‘pay for’ real increases in spending.”
Here’s the backstory.
When pharmaceutical manufacturers develop and release a new prescription drug, they set the drug’s initial price. Then pharmacy benefit managers (PBMs) negotiate with the drug companies for lower prices and rebates. The PBMs then pass part of those savings on to consumers.
The Trump administration went through the process of issuing a rule for the Medicare Part D prescription drug program that would require those PMB rebates resulting from Medicare Part D plans to be passed on to patients in the form of lower drug prices.
BUT, the federal government covers 75 percent of the overall cost of Medicare Part D premiums. PBMs argued that forking over the rebates to patients in the form of lower prices meant that money couldn’t be used to lower Part D premiums. And higher Part D premiums would cost the federal government more money.
The Medicare actuary and the Congressional Budget Office agreed, with CBO estimating the cost to the federal government at about $177 billion over 10 years—later upped to $186 billion.
Some of us had doubts about the accuracy of that estimate—CBO projections are often way off the mark—but that’s the official estimate and that’s what counts.
Now, as Jacobs points out, the Biden administration planned to drop the Trump rebate rule before it ever went into effect. But the administration is keeping it on life support so Republicans and Democrats can use the “savings” from its $186 billion projected cost to offset some of the infrastructure bill spending.
Hence, a Part D rule that has never been in effect and has never cost the federal government a dime will be the source of nearly $200 billion in savings over 10 years.
We wish the Part D savings scam was the worst example of Washington’s budget shenanigans in the infrastructure deal—but it probably won’t be.