The Dems' Plan B for Medicare

| Thu Jun. 16, 2011 12:27 PM EDT

Democrats have walloped the Republicans mercilessly for supporting Rep. Paul Ryan's plan to roll back Medicare. Republicans have shot back by accusing the Dems of having no ideas or plans to save the entitlement from insolvency. Now the Dems now seem determined to show the public that they can find ways to cut Medicare costs without jeopardizing the well-being of the nation's senior citizens.

On Thursday, House Democrats introduced a new bill that would reduce payments to drug companies for covering low-income Americans who are enrolled in the Medicare Part D program, which was passed in 2006 to subsidize drugs for seniors. The new bill, sponsored by Reps. Henry Waxman (D-Calif.), John Dingell (D-Mich.), and others, promises that it will "eliminate a sweetheart deal for brand-name drug manufacturers," according to a news release, allowing them to charge higher rates for patients enrolled in both Medicare and Medicaid. The House Dems explain why the drug prices the government pays went up—and why the GOP is responsible:

Prior to 2006, the government received substantial rebates on drugs used by "dual eligible" Medicare and Medicaid enrollees. However, beginning in 2006, the Republicans' Medicare Part D law eliminated these rebates, dramatically raising prices for the government and profits for manufacturers. The Part D deal resulted in a substantial drug manufacturer windfall. The bill eliminates the windfall and requires that manufacturers pay the rebates for dual eligible and low-income Part D enrollees, ensuring that taxpayers and the Medicare program do not overpay for Part D drugs.  

In other words, the 2006 Medicare Part D deal gave Big Pharma a break by forcing the government to pay higher, Medicare-level payments for prescription drugs, and Democrats now want to eliminate that deal. House Dems claim their proposal would save more than $100 billion, citing an evaluation from the Congressional Budget Office. President Obama made similar noises about saving money by forcing drug companies to take the hit, proposing earlier this year that the government negotiate directly with drug companies to set prices for drugs under Medicare.

Neither proposal will be an easy sell. Drug companies were one of the few industry allies to stay on board with federal health reform—partly because they were able to fend off Democratic proposals that would slash Medicare drug payments. But Democrats are hoping that the new bill, which was also introduced in the Senate, will help cast them as both fiscally responsible and compassionate—and not just the new "Party of No."

"Instead of making devastating cuts to programs that help low-income and middle-income Americans, as Republicans keep putting on the table, we should do what every other industrialized country does and ask the pharmaceutical industry, one of the wealthiest in the world, to chip in," Rep. Pete Stark (D-Calif.), one of the bill's sponsors, said in the statement.