LETTER: Even in health care, competition works

By Grace-Marie Turner
President, the Galen Institute

When it comes to government spending and America’s health care system, it’s rare to hear good news. But according to a recent report, the Medicare Prescription Drug Benefit is costing significantly less than originally estimated.

According to the Centers for Medicare and Medicaid Services, which administers the Medicare program, the average monthly premium for the standard Medicare drug benefit will cost seniors $28 in 2009.
That’s 37 percent lower than the $44 a month legislators predicted when the program was created in 2003.

While there was a great deal of criticism initially about adding a drug benefit to Medicare, Congress established a new model through an unprecedented partnership between private insurance plans and this public program. Participants can enroll in private drug plans offered by private insurers, but with oversight from Medicare officials.

Instead of the one-size-fits-all model typical of government health insurance, the Medicare drug benefit offers a wide range of choices. Seniors typically can choose from among 20 or more plans in their regions, including Medicare Advantage plans that integrate drug and medical coverage into one health plan.

Participants pick their own plan, based on their medical needs and coverage choices. Insurers compete for the business of seniors by offering the most generous benefits they can for the most affordable price. Many plans have sought market advantage by offering coverage in the dreaded “donut hole” so seniors aren’t exposed to their full medical bills once they hit the coverage gap that Congress designed.

Competition and consumer choice are working to bring costs down. This is a testament to an essential truth of health reform: The market works.

CMS also reports that the total cost of the Medicare drug benefit in 2009 will be $46.4 billion — substantially less than the initial estimate of $74 billion.