HHS’ Sebelius Takes Up Gauntlet Against Medicare Overhaul

In her appearance at the convention in Charlotte, N.C., on Sept. 4, HHS Secretary Kathleen Sebelius promoted the benefits of the Affordable Care Act and sought to draw a distinction between the plan for Medicare embodied in the ACA and that advanced by Republican presidential candidate Mitt Romney.

At the Democratic National Convention, HHS Secretary Kathleen Sebelius took up the gauntlet for the Obama administration in opposition to the Republican plan to overhaul Medicare.

In her Sept. 4 appearance at the convention in Charlotte, N.C., Sebelius played what has become a familiar role: promoting the benefits of the Affordable Care Act. She also sought to draw a distinction between the plan for Medicare embodied in the ACA and that advanced by Republican presidential candidate Mitt Romney and running mate Rep. Paul Ryan, R-Wisc.

Romney and Ryan endorse the idea of transforming Medicare into a premium-support program, in which benefits would be managed and delivered by private insurance plans (Also see "Republican National Platform Embraces Medicare Transformation, FDA Reform" - Pink Sheet, 29 Aug, 2012.). Although the pharmaceutical industry supported passage of the ACA, it is aligned with Republicans on their approach to Medicare reform. Biopharma strongly supports the general concept of converting Medicare into a “defined contribution,” privatized system as a way to restrain spending growth and avoid cost reduction measures that could involve price controls on drugs, such as mandated rebates in the Part D program, or shorter market exclusivity periods for innovator biologics (Also see "Medicare Reform Using Part D Model Is Advocacy Priority For PhRMA – Castellani" - Pink Sheet, 6 Aug, 2012.).

The ACA would not fundamentally change the structure of Medicare. It does cut Medicare spending, most significantly to Medicare Advantage plans and hospitals. The Congressional Budget Office has estimated that if the ACA were to be repealed, Medicare spending would increase by $716 billion from 2013 to 2022.

However, the administration maintains the reductions directed by the ACA will not disadvantage seniors. In her remarks, Sebelius claimed the ACA would protect the Medicare program for beneficiaries, unlike the Republican plan. “What's missing from the Romney-Ryan plan for Medicare is Medicare,” she said. “Instead of the Medicare guarantee, Republicans would give seniors a voucher that limits what is covered, costing seniors as much as $6,400 more a year” as they pay for the cost of additional benefits.

With the cost cuts in the ACA, Sebelius added, “President Obama extended the program's life by eight years while improving seniors' benefits, and strengthened the Medicare guarantee. The president agrees with you: no vouchers!”

Her remarks echo the position on Medicare reform in the Democratic platform, released Sept. 4. “The Republican budget plan would end Medicare as we know it. Democrats adamantly oppose any efforts to privatize or voucherize Medicare; unlike our opponents we will not ask seniors to pay thousands of dollars more every year while they watch the value of their Medicare benefits evaporate,” it states.

The fact that the ACA assigns the difficult decisions about future Medicare cost control measures to the controversial Independent Payment Advisory Board is another reason for the drug industry to prefer an approach like Romney-Ryan.

The drug industry staunchly opposes creation of IPAB, which is expected to focus on drug expenditures as a priority area for reducing costs, at least in the near term, and whose recommendations would be fast-tracked through Congress. The board is prohibited by law from recommending changes in benefits or eligibility or to reduce payments to certain providers, such as hospitals, before 2020. So IPAB’s focus before then could turn to cutting reimbursement for drugs in Medicare Part B or reducing payments for Part D and Medicare Advantage programs.

More worrisome for industry is the fact that Obama has said he wants to strengthen IPAB’s powers. He has proposed that the board be directed to limit Medicare cost growth per beneficiary to GDP growth per capita plus 0.5% beginning in 2018. Under the ACA, IPAB’s targeted cuts are 1% above GDP growth beginning in that year. The president also advocated giving the board powers to sequester congressionally authorized funds if Congress were to overrule its decisions.

During the convention’s Tuesday prime-time session, Sebelius played a featured role defending the ACA, the Obama administration’s signature legislative achievement. She drew attention to the fact that the ACA is modeled on the health care reform legislation passed in Massachusetts under then-Governor Romney.

“I was governor of Kansas when Mitt Romney was governor of Massachusetts,” she said. “Many of us watched in amazement – envy, even – as he passed a universal health care law in his state. Well, Republicans may see Romneycare as a scarlet letter. But for us Democrats, Obamacare is a badge of honor. Because no matter who you are, what stage of life you're in, this law is a good thing.”