AARP is fighting to protect Medicare for seniors and strengthen the program to ensure future generations have guaranteed, high-quality health care. But a flawed doctor payment system — called the sustainable growth rate (SGR) — is threatening to drive doctors out of the Medicare program.
For more than a decade, Congress has been unable to agree on how to fix this broken system, which, unless action is taken before March 31, will cut payment to doctors who take Medicare patients by 25 percent. After years of kicking the can down the road, Congress has reached an agreement on a new system that would reimburse doctors based on the quality of care they provide, not how many services they perform. The big sticking point is how to fund this change, which is estimated to cost $130 billion to $150 billion.
AARP is calling on Congress to find a responsible way to protect access to doctors without unfairly burdening seniors, who on average already spend nearly 20 percent of their income on out-of-pocket health care costs. That means reducing health care costs, not shifting costs to seniors. One way Congress can reduce costs is to clamp down on drug companies’ high prices. Common sense proposals to reduce drug prices include:
Require Drug Companies to Give Rebates to Medicare
Unlike Medicare Part A, which is financed primarily through payroll taxes, Medicare Part D — the prescription drug benefit — is funded through premiums and general tax revenue. Thus, as Part D spending increases, so does the cost shouldered by both Part D enrollees and taxpayers. By reducing prescription drug spending under Part D, both taxpayers and Part D enrollees will benefit. Drug manufacturers already return part of the cost of drugs for Medicaid beneficiaries to that program as rebates. Medicare doesn’t get the same treatment. Requiring drug makers to provide the same rebates to Medicare for just the program’s 11 million lowest-income beneficiaries would result in substantial savings. That’s what the Medicare Drug Savings Act (S.740/HR1588) would do, and AARP endorses the bill. The nonpartisan Congressional Budget Office has scored this option as saving $141 billion over 10 years.
Make Biosimilar Drugs More Available
Biologics (or biosimilars) are drugs created by biological processes rather than being chemically synthesized. They are fast becoming the future of pharmaceuticals. These drugs are used to treat many diseases that often affect older populations, including multiple sclerosis, arthritis and cancer. Increasing the availability of biosimilars will be essential to a strategy for containing health care costs. Dropping the exclusivity period for manufacturers’ patents from 12 years to seven could save $3.8 billion over 10 years, according to the Office of Management and Budget. And generic biosimilars would cost 40 percent less compared with their brand-name counterparts, according to the CBO.
Prohibit Pay-for-Delay Agreements
Congress can pass legislation now that would lower drug costs by banning pay-for-delay agreements between brand-name prescription drug companies and generic manufacturers. Through pay-for-delay agreements, patent-holding drug manufacturers pay generic drug companies not to produce a generic equivalent to popular prescription drugs, thereby holding on to their exclusivity for that drug — and their high prices and profits at the expense of consumers and taxpayers. The CBO has scored the Preserve Access to Affordable Generics Act (S. 214) and the Fair and Immediate Release of Generics Act (S. 504), which would prohibit these agreements and speed up market entry of generics, as saving between $3.8 billion and $4.7 billion over 10 years.
These are some of the ways we can pay for a much-needed fix to our broken system for paying Medicare doctors. It’s time to replace it with a system that protects Medicare beneficiaries — both financially and medically — while rewarding physicians for providing high clinical-quality, patient-centered care.