Sen. Joe Manchin and the AARP “support government pricing schemes” that divert money from Medicare to “unrelated government programs or pad the profits of big insurers.”
Advertisement by American Promise, July 10
A slick political ad from the conservative advocacy group American Commitment accuses Sen. Joe Manchin (DW.Va.) of supporting a legislative plan that would drain “billions in funding” from Medicare.
Specifically, the ad claims that Manchin and AARP, the well-known advocacy group for people 50 and older, “support government pricing schemes that would give liberal politicians billions in funds that would otherwise be spent on unfunded government programs or pads for Medicare. . Insurers’ profits.” Here, “price-fixing” is a reference to a policy proposal that supporters say would give Medicare the power to rein in the prices it pays for some prescription drugs to bring them more in line with prices in other industrialized countries.
American Commitment did not immediately respond to KHN’s request for comment, but its president, Phil Karpen, Take to Twitter to respond Search our email. Karpen tweeted on July 14 that “CBO shows Manchin/Schumer drug price controls raid Medicare by $287 billion, much of which is expected to go to insurance companies as supersized Obamacare subsidies.”
That’s a reference to the Congressional Budget Office’s July 6 cost estimate of prescription drug policies in an economic package — a law known as a reconciliation bill — that Senate Democrats led by Majority Leader Chuck Schumer hope to bring to the floor. Next week the CBO found that these policies would save $287.6 billion over 10 years as a result of reduced Medicare spending on drugs. More on this topic later.
Both Manchin and AARP dismissed the ad’s message.
“This Big Pharma-funded ad blatantly lies about Sen. Manchin’s record,” said Sam Runyon, Manchin’s communications director. “West Virginia seniors know Sen. Manchin has worked tirelessly to protect Medicare and lower prescription drug costs.”
According to OpenSecrets, American Promise received $505,000 from drug industry trade group PhRMA during the 2020 election cycle.
In the days after the ad began airing, Manchin announced that he would support a slimmed-down version of the reconciliation bill, though his support for Medicare drug-price negotiations remains unchanged.
Bill Sweeney, AARP’s senior vice president of government affairs, said the ad is representative of the “false attacks” that opponents of the proposal are using. “So I don’t think there can be anything else [from] True,” he said, referring to the ad’s claim that the Medicare program would be cut to pay for something else.
The ad is marked by accusatory language and opinions, and it raises questions about whether giving Medicare the power to regulate drug prices would be the pricing scheme that makes the American promise.
What is Medicare drug-price negotiation?
The ad claims that Manchin and AARP “support government pricing schemes.” And it’s true that Manchin and AARP continue to advocate for Medicare drug-price negotiations.
So what does that mean?
Medicare is currently prohibited from negotiating directly with pharmaceutical companies over how much it pays for certain prescription drugs, so that power would be new. Proponents of the proposal say doing so would result in significant savings for Medicare because it pays much more than the rest of the world. Critics of the proposal, such as Karpen, call the practice “price fixing.”
The Medicare drug provisions of the reconciliation bill would allow the program to negotiate drug prices for a limited set of drugs — 10 initially and another 10 in subsequent years — and limit drug price inflation. The legislation would set a $2,000 limit on annual out-of-pocket drug costs for Medicare beneficiaries. Companies that opt out will face excise tax on the previous year’s profits
Joseph Antos, a senior fellow at the American Enterprise Institute and health care scholar, said an argument could be made that even if drugmakers and the government would negotiate lower prices for certain drugs, the program would force drugmakers to comply or face a cap. Tax penalty
“Producers will have no leverage – that’s what a law provides [the Centers for Medicare & Medicaid Services] Pricing authority,” Antos said. “There will be discussions, and of course, it’s polite to call them discussions,” he added, but ultimately the government will decide
Medicare savings or cuts? Typical Washington spin
Historically, both Republicans and Democrats, as well as the advocacy groups associated with them, have presented Medicare spending cuts as a cut to the program while trying to gain traction with voters.
In this case, however, the drug pricing experts we consulted unanimously agreed that, from a budgetary perspective, the roughly $288 billion estimate from CBO represents savings for Medicare, rather than funds diverted from the program as advertised.
“What’s happening here is not the elimination of a Medicare service or benefit — we’re talking about paying lower prices for the same drugs that we currently pay the highest prices in the world for,” said Rachel Sachs, a law professor and professor of medicine and a pricing expert at Washington University in St. Louis.
“So, I would say it’s fairly confusing,” Schacht said.
In fact, if Medicare pays less for drugs, it could have a beneficial trickle-down effect, said Matthew Fiedler, senior fellow at the University of Southern California-Brooking’s Schaefer Initiative for Health Policy. Because, in this scenario, Medicare premiums and cost-sharing will also decrease, saving beneficiaries money. Actual savings will likely vary, though.
Another common argument of the pharmaceutical industry is that if their revenues decrease, fewer drugs can be made in the future. CBO estimates that the drug-price negotiation provision would prevent the approval of about 15 new drugs over 30 years. Under current law, about 1,300 drugs would typically be approved over the same period, according to the CBO.
“There is much disagreement about how large these effects will be and whether we are talking about high- or low-cost drugs,” Fiedler wrote in an email, referring to the reduced number of drug approvals. “There’s a potential trade-off between lower costs for beneficiaries and fewer new drugs down the road, although Medicare beneficiaries will be worse off overall.”
It’s also important to note that these drug price negotiations will target a small subset of drugs — 20, at most — even though the law targets the most expensive single-source drugs, which could include some cancer drugs, blood thinners and rheumatoid arthritis drugs. Medicines However, drug companies will be free to profit from the sale of their other drugs.
So, overall, experts say the ad’s contention that drug price negotiations will negatively affect seniors is wrong.
Will insurers benefit if ACA subsidies are increased?
The ad also alleged that billions of Medicare dollars saved by liberal politicians would be spent on “unrelated government programs” or “for the benefit of big insurers.”
Senate Democrats said the estimated savings to Medicare of about $288 billion would be used to offset the costs of other programs.
There’s no question that the $288 billion in savings “will give Congress the ability to spend something else in the same bill,” Antos said. “But, again, it’s not a revelation – that’s how all laws work. The ad makes it sound out of the ordinary, but it’s actually completely normal.”
Democrats’ previous plans for the reconciliation bill included provisions on climate change, energy and tax policy. However, momentum is now behind the approach supported by Manchin, which includes increased premium subsidies for two years only for consumers who buy insurance plans in the Affordable Care Act marketplaces. The American Rescue Plan Act, which became law in March 2021, initially increased those subsidies and made it easier to qualify for aid, but that aid ends at the end of this year. When the subsidies expire, millions of people will have to pay much higher insurance premiums or lose their coverage.
This point brings us to advertising claims about padding insurers’ profits — which Carpen has linked to increasing ACA subsidies. According to experts, this is not true.
“Insurers may capture some, as they will make their normal profit on new enrollments,” Fiedler said. But “these effects will be small compared to the amount of money involved.”
The ACA also includes a provision that prevents insurers from profiting too much from marketplace plan premiums, said Linda Blumberg, a fellow at the Urban Institute’s Health Policy Center. And enrollment growth will also increase medical demand.
Both Bloomberg and Fiedler said the proposal to increase subsidies as padding insurers’ profits is misleading.
The American Commitment ad claims that Manchin and AARP support a “price-fixing scheme” that would divert funding for Medicare to “spend on unrelated government programs or pad the profits of big insurers.”
According to the experts we have consulted, the ad is not accurate. Medicare drug pricing plans result in savings, not diversion of funds from the Medicare program. The ad also distorts the fact that those funds will be used to support other initiatives—in this case, ACA subsidies. It is not a secret conspiracy but a regular part of the reconciliation process. Additionally, if the plan succeeds and ACA subsidies are increased, insurance companies are unlikely to make large profits if it succeeds. We rate it false.
American Promise Political Ads, “Manchin Attacks Ad Campaign in West Virginia,” July 2022
Brookings Institution, “What is Reconciliation in Congress?” February 5, 2021
Congressional Budget Office, “Estimated Budgetary Implications of Subtitle I of Reconciliation Recommendations for Prescription Drug Laws,” July 8, 2022
Email interview with Rachel Sachs, law professor at Washington University in St. Louis, July 13 and 18, 2022
Email interview with Linda Bloomberg, a fellow at the Urban Institute’s Health Policy Center, July 14, 2022
Email interview with Juliette Cubansky, Deputy Director of the Program on Medicare Policy at KFF, July 21, 2022
Email interview with Stacy Dusetzina, associate professor of health policy at Vanderbilt University, July 14, 2022
Email interview with Matthew Fiedler, senior fellow at the University of Southern California-Brookings Schaefer Initiative for Health Policy, July 13 and 19, 2022
Email interview with Sam Runyon, communications director for Sen. Joe Manchin, July 14, 2022
KHN, “Seeking to kick-start Biden’s agenda, Schumer unveils bill to negotiate Medicare drug prices,” July 7, 2022
KHN-Politifact, “An ad charges drug price haggling ‘will swipe $500 billion from Medicare’ is false,” September 28, 2021
KHN-PolitiFact, “Democratic Super PAC Uses Familiar Political Game to Hit Trump on Medicare,” 29 May 2020
KFF, “Explaining Health Care Reform: The Medical Loss Ratio (MLR),” February 29, 2012
KFF, “Simulating the Impact of Drug Price Negotiation Proposals on the Build Back Better Act,” January 27, 2022
OpenSecrets, “Pharma lobby pours millions into ‘dark money’ groups to influence 2020 election,” 8 Dec. 2020
Phone interview with Joseph Antos, Senior Health Care Scholar, American Enterprise Institute, July 13 and 19, 2022
Senate Finance Committee, “Subtitle I — Prescription Drug Pricing Reform,” June 19, 2022
July 14, 2022 Tweet from Phil Karpen, president of American Commitment
July 14, 2022, Video Interview with Bill Sweeney, Senior Vice President of Government Affairs, AARP
The Washington Post, “Manchin Says He Won’t Support New Climate Spending or Tax Increases on the Rich,” July 14, 2022