The headlines were bold, trumpeting House Speaker Nancy Pelosi’s new legislation to lower drug prices, H.R. 3. Many mainstream media outlets said the drug plan would save Medicare $345 billion. Wow.
However, each breathless story included the phrase “according to the Congressional Budget Office.” Well, that’s a horse of a different color.
You see, the Congressional Budget Office (CBO) does not have what one would call a stellar track record on health care cost projections. So a news consumer should ask: “How likely is it that the CBO is correct about saving $345 billion in Medicare funding for our seniors?” The answer? Not very.
Let’s refer back to a few of CBO’s health care greatest hits. The CBO predicted – or “scored” – various aspects of the Affordable Care Act, better known as ObamaCare. CBO wasn’t just wrong, it was consistently wrong – with some predictions that were too high and some that were too low – on an epic scale.
For example, in its final projection just before the ObamaCare private exchanges actually went live, CBO predicted that enrollment through the exchanges would total about 22 million individuals by 2016. Actual enrollment was around 10 million. Oops.
In 2015, CBO predicted that enrollment through the exchanges would double between 2015 and 2016. Wrong again – almost zero change occurred.
n 2014, CBO estimated that ObamaCare’s “risk corridor” program to subsidize private insurers on the exchanges would net a positive $8 billion annually for federal coffers. But by 2015, actual losses to the feds reached $5.8 billion.
How about Medicaid expansion? There the CBO was 50 percent off. That is, over 50 percent more individuals enrolled under Medicaid expansion than predicted. Not only that, the cost per enrollee was $6,366 per year – 49 percent higher than CBO’s guesstimate.
What else did CBO get wrong? According to the Hudson Institute, Forbes, Citizens Against Government Waste and others, a lot. How about overall cost? CBO projected the total cost of Medicaid expansion at around $42 billion; the actual cost was 62 percent higher – about $68 billion.
CBO’s based its overall budget projections on an expected gross domestic product growth rate of 3.2 percent annually. That seemed safe, since the recovery under President Ronald Reagan after a major recession averaged 4.6 percent,
But President Barack Obama’s regimen of stifling taxes and strangulating regulations yielded a paltry 2.1 percent annual “recovery” -- the worst in modern times. That put CBO’s predicted budget impact way off, again by about half.
So please forgive my jaundiced reaction to news reports that the CBO predicts $345 billion in Medicare savings from Nancy Pelosi’s new federal takeover of the pharmaceutical industry. If the past is prologue, and it is, CBO’s assurances are of little value.
Add to my fiscal skepticism the other, non-fiscal, impacts of Pelosi’s “offer you can’t refuse.” The plan features a confiscatory 95 percent tax on sales if manufacturers fail to acquiesce to the government’s “gun to the head” negotiation demands.
The plan also includes price controls tied to foreign socialist systems – a sure way to hike costs and slash supply. It will also kill new drug development, the lifeblood of the American drug industry.
Even worse is that Pelosi has targeted Medicare Part D, the one massive government program that even critics (like me) will grudgingly admit has exceeded expectations.
The program produces savings and high customer satisfaction through market-oriented practices. Pelosi’s response? If it ain’t broke, let’s break it so we can claim credit for the fix!
The biggest problem dogging drug prices in this country is counterproductive government regulations. The solution Democrats offer? Let’s double down on counterproductive government regulations!
It makes about as much sense as anything else coming from a rudderless, desperate Democratic Party that is approaching 2020 with a growing sense of dread.