Medicare Wasn't Broken Until Democrats Made It That Way

Democrats Got Their Hands on Medicare, It's Never Been the Same Since

Seniors shopping for a prescription drug plan during this year's Medicare open enrollment season are in for an unpleasant surprise.

They'll have far fewer choices than in previous years — and will have a harder time getting assistance purchasing a plan.

The program's cost to taxpayers, meanwhile, have soared.

What happened?

The Democrats' 2022 Inflation Reduction Act (IRA) happened.

Three years after its passage, the law has distorted the market for drug coverage in ways that raise costs, stifle competition, and leave seniors much worse off.

Part D is the segment of Medicare that allows enrollees to purchase subsidized prescription drug coverage from private insurers.

It was designed two decades ago with market principles in mind.

By forcing insurers to compete against one another for seniors' business, the program's architects hoped to create a market that delivered quality coverage at prices that were affordable for both beneficiaries and taxpayers.

And that's largely what happened.

Roughly nine in 10 seniors reported being satisfied with their drug coverage last year.

A majority of Part D beneficiaries say that their plans offer a good value for the money and are convenient to use.

Coverage has also proven quite affordable, with the average prescription drug plan costing seniors just $43 a month in 2024.

Not content to leave well enough alone, Democrats have chosen to meddle with Part D.

Seniors now pay the price.

The IRA capped seniors' out-of-pocket pharmacy spending at $2,000 a year and capped insulin costs at just $35 a month.

Those might sound like good things for Part D enrollees.

But the chief response from the insurers has been to raise premiums across the program in order to cover these new liabilities.

The Biden administration went to extraordinary lengths to hide these premium hikes from patients last year.

To that end, the previous administration put in place a "demonstration" program which gave any senior who chose to participate a steep, federally-funded premium cut --- while also capping year-over-year premium increases.

This unilateral executive-branch reform ensured that the Biden-initiated Part D price hikes wouldn't register with seniors until after the 2024 presidential election — which is, after all, what it was supposed to do.

The cost to taxpayers? Approximately $5 billion.

Worst of all, the program utterly failed to address the underlying problems that the IRA created for Part D.

The Trump administration has taken steps to wind down Joe Biden's wasteful policy by slightly reducing the demonstration program's premium reductions.

But this hasn't saved taxpayers much.

Instead, it merely unlocked a torrent of new federal subsidies to compensate for the decrease in "demonstration" payments.

All told, Part D subsidies are set to increase by more than 31% in 2026, to $243.78.

Were it not for this wave of federal assistance, premiums were on track to increase by nearly 600% compared to 2023.

Even with the generous federal giveaways, seniors are still feeling the pinch from the IRA's reforms --- mostly in the form of reduced choice as insurers flee the market.

In 2021, the average Part D beneficiary had 30 different drug plans to choose from.

In 2026, the program will offer seniors anywhere from 8 to 12 plans, depending on where they live.

The damage inflicted by the IRA doesn't stop there.

As a recent study by the Paragon Health Institute notes, Part D insurers have also begun eliminating broker fees to keep costs down in response to the new law.

As a result, many seniors will be left choosing plans without the assistance of an insurance professional.

By almost any measure, Part D is the aspect of Medicare which is least in need of reform. And yet Democrats chose to tinker with the program — resulting in higher premiums, less choice, and a considerably worse patient experience.

Seniors might be protected from the financial consequences of these errors for the time being. But taxpayers won't, as they are footing the bill for billions of dollars in new subsidies that shouldn't have been necessary.

Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is "The World's Medicine Chest: How America Achieved Pharmaceutical Supremacy — and How to Keep It." Follow her on X @sallypipes. Read more of Sally Pipes' reports — here.