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Lower drug costs key to Medicare reform

Setti Warren | 6/8/2011, 9:35 a.m.
Democratic Newton Mayor Setti Warren speaks to supporters during a campaign event in Newton, Mass., Tuesday, May 10, 2011. Warren, who announced his candidacy May 9 for the U.S. Senate seat currently held by Scott Brown, is serving his first term as the first popularly elected black mayor in Massachusetts. He is also an Iraq War veteran and a former staff member for Sen. John Kerry. AP /Josh Reynolds

News articles of recent weeks have been filled with politicians debating Republican Rep. Paul Ryan’s plan to privatize Medicare. The Congressional Budget Office (CBO) estimated in early April that Ryan’s approach would actually increase an average senior’s medical costs by $6,400 in a decade.

I believe we must fight against privatizing Medicare, while offering serious proposals to keep the program solvent and confronting the long-term cost drivers in our health care system.

That begins with defending and improving the health reforms signed into law by President Barack Obama last year, which increase the solvency of Medicare, and give 87,000 Massachusetts Medicare beneficiaries access to more than $20 million in tax credits to help them afford prescription drugs.

Repealing the law would increase the deficit by $230 billion while preserving a $136 billion taxpayer subsidy to boost private insurance-company profits through overpayments to Medicare Advantage. I would vigorously fight repeal efforts, but health reform is only a start.

We need to forcefully combat waste and fraud wherever we find it. The CBO estimates that every $1 invested in cracking down on fraud in Medicare and Medicaid returns $1.75 for taxpayers, which would save $50 billion. This just sounds like efficient government to me, but it’s only a piece of what we must do to control Medicare costs.

My plan is focused on reducing the price of prescription drugs and reforming the way we pay for care.

American consumers pay the highest prices in the world for FDA-backed prescription drugs. Allowing Medicare to use its bargaining power to negotiate the prices of prescription drugs would have a game-changing impact for seniors on fixed incomes. Medicare already serves as a model for savings in some areas with administrative costs accounting for only 2 percent of its total spending, compared to as much as 17 percent for private insurers. Negotiating drug prices could save taxpayers an estimated $200 billion.

Also, lifting the federal ban on the importation of FDA-approved drugs would reduce the cost of medications by up to half. Putting downward pressure on prices would help consumers, including Medicare and Medicaid recipients, afford their medications. Municipalities across the country and the state, including Newton, already do this, and it saves millions. Bills in the Senate, with strong safeguards against counterfeiting and other risks, have received bipartisan support. This pragmatic approach would save the government $20 billion and consumers another $100 billion in the form of lower prices.

There is bipartisan consensus that Medicare’s reimbursement system, like so much of the rest of our health care payment system, is fundamentally flawed. The health-reform law achieved $200 billion in savings by starting to move the broken “fee-for-service” system to one based more on patient outcomes — without any discernible impact on quality of care. We need to follow through on reform, eliminate the “fee-for-service” model entirely, and replace it with a payment plan that rewards prevention, primary care and chronic disease management rather than the number of procedures and tests ordered.

Adopting a model based on patient outcomes would incentivize physicians to achieve savings by coordinating their services, especially for seniors with chronic conditions, reducing total Medicare spending by up to 30 percent.

In addition, we must ensure that these payments are equitable and encourage providers to remain in the Medicare system. Physicians currently face a potential 29 percent cut in reimbursements, and this problem requires a long-term solution.

I balanced two budgets as mayor by slowing the growth of spending to achieve $8 million in savings during the recession. I believe in smart, efficient and effective government to bring about these results. Now is not the time for demagoguery on Medicare. It’s time for serious, thoughtful leadership to find the right solution that doesn’t saddle seniors and consumers with higher costs.

Setti Warren, the mayor of Newton, is a Democratic candidate running for U.S. Senate. The article was first published in the Lowell Sun.