NCPA - National Center for Policy Analysis


April 20, 2007

Republicans won a big victory this week, shooting down a Democratic plan for more government-run health care. The GOP victors and free-marketeers might send their thank-you notes to Dr. Mark McClellan, the administrator for the Centers for Medicare and Medicaid Services, says Kimberley Strassel (Wall Street Journal).

Nancy Pelosi, Harry Reid and others felt Medicare was an issue on which they could once again roll Republicans, by flashing the impoverished-senior-citizens card.  Instead, McClellan's new model came online and wowed the older class, says Strassel:

  • Private companies have flocked to offer a drug benefit, giving most seniors a choice of 50 innovative plans.
  • The competitive jockeying has slashed prices from an expected $37-a-month premium to an average $22.
  • The cost of Medicare Part D for taxpayers was 30 percent below expectations its first year -- unheard of in government.
  • And Medicare Advantage, which allows seniors to choose between private insurers, has grown to encompass nearly one in five beneficiaries.

McClellan's success, in particular with the drug benefit, rests in two broad ideas, says Strassel:

  • The first was to design a program that immediately attracted a critical mass of private players to provide price and choice competition.
  • It worked, creating so much competition that sponsors are eliminating deductibles, lowering premiums, offering more drugs; it's also led to smart cost-cutting and efficiencies; an estimated 60 percent of Medicare prescriptions are now for generics.
  • The other strategy was to get seniors enrolled quickly; today, some 90 percent of Medicare recipients are enrolled in the benefit, numbers that have further attracted private players, further spurred competition, further lowered prices.

Source: Kimberley Strassel, "Competence Man," Wall Street Journal, April 20, 2007.

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