By Tomas J. Philipson. Media: Nationalreview
Biden and Harris hope that policy trickery can delay the massive Medicare Part D premium hikes their policies will cause until after the November election.
Joe Biden and Kamala Harris have clearly learned something from the 2020 election: They need to get rid of October surprises. Scandalous news that could make voters think twice about pulling the lever for Democrats ā like Hunter Bidenās laptop ā must be buried until after the election.
The Democratic scandal of this cycle isnāt quite as salacious as the younger Bidenās hijinks. But itās immensely damaging to ordinary Americans, which is why the White House is so keen on hiding it from the public.
In a quiet move, the administration just launched a plan to transfer tens of billions of taxpayer dollars to the nationās largest health insurers to cover up a massive Medicare policy failure.
The goal? Delay enormous Medicare Part D premium hikes that would otherwise be announced right before the election, during the October open-enrollment period.
Premiums are set to soar due to the Inflation Reduction Actās āreformsā of Medicareās Part D prescription-drug benefit, which enrolls more than 50 million seniors nationwide. The BidenāHarris administration is understandably desperate to hide the disastrous consequences of its signature achievement.
But the bailout will merely delay the political pain for the administration, and the economic pain for seniors. The IRA is fundamentally flawed. It needs to be substantially reformed ā or, even better, repealed.
Problems with the Part D overhaul became apparent as soon as the IRA took effect. From 2023 to 2024, the average Part D premium rose by 21 percent ā the highest increase ever. The Kaiser Family Foundation reported that the three largest Part D sponsors ā Cigna, Humana, and Aetna ā increased premiums for certain common plans anywhere from 33 percent to 57 percent.
The number of stand-alone Part D plans has also declined. Kaiser found that eleven insurers offered the lowest number of plans since Part D began in 2006. Fewer plans mean seniors have fewer choices and insurers have less incentive to offer competitive services, which further increases premiums.
And the numbers for 2025 look far worse. The IRA will shift considerable financial burdens onto insurers starting next year by cutting the Part D program and mandating how benefits design out of pocket payments. In response, insurers have nearly tripled the ānational average bid amount,ā which effectively represents the expected monthly cost of providing a senior with drug coverage.
The 179 percent increase in the bid amount would normally result in a broadly equivalent hike in premiums, since premiums are correlated with bid amounts, though the correlation is not exact.
The BidenāHarris administration realizes that itās far too close to Election Day to tell seniors that theyāre looking at a massive hike in monthly payments. So instead of releasing preliminary Medicare Part D premiums in July, as Medicare normally does, the administration announced a politically expedient ādemonstrationā to limit premium increases.
Demonstrations are typically set up to test how new policies work. But nothing is being demonstrated in this one, except that Democrats do not understand health-care markets. Instead, the three-year demo is nothing more than a taxpayer-funded bailout for insurers to make up for the IRA failure.
Itās not yet clear exactly how much the demo will end up costing taxpayers. But the number will be staggering.
To be clear, no senior should ever see their Medicare premiums skyrocket overnight. But the demo doesnāt preclude that from happening in the long term. Itās a temporary band-aid that raids billions from a Medicare trust fund to pay insurers rather than benefitting seniors. It does nothing to increase the number of plan options available to Medicare beneficiaries, nor to fix any of the other IRA provisions that are keeping premiums high.
It could also exacerbate the IRAās devastating impact on our federal budget. Back in 2021, the Congressional Budget Office estimated that the IRA would reduce the deficit by $90 billion over ten years. But revised 2024 CBO figures indicate that, in fact, the IRA will increase the deficit by some $562 billion. This follows a predictable pattern in which the CBO downplays the costs of government expansions until after they are signed into law. Itās the legislative equivalent of the White House striving to avoid October surprises.
The bottom line is that the demo is an unsustainable stopgap to cover up the damage done by the IRA to Medicare, damage that will last long after Election Day.
