Guest Column: Firm Up Medicare With Drug Discounts, Not Spending Cuts

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by AURVELLA HENRY

On the presidential campaign trail, former South Carolina governor Nikki Haley has taken a lot of heat for suggesting making cuts to Medicare.  Understandably so. Over 200,000 people in this state depend on Medicare Part D alone, and cutting federal Medicare funding can leave them without the healthcare safety net they need and deserve. 

While Haley’s solution (Medicare cuts) is without question the wrong prescription, she’s right that something needs to be done to protect Medicare. 

In February, Congressional Budget Office director Phillip Swagel announced that Medicare is projected to experience a funding shortfall in 2028, with Medicare spending more than doubling from $710 billion in fiscal year 2022 to an estimated $1.6 trillion in 2033, when it will represent 4.1 percent of the nation’s GDP. Consumer advocates are concerned that, as the system continues down the path of financial instability, payments to Medicare beneficiaries can come at risk. 

South Carolina can’t have this happen. Its aged 65 and above population has increased by more than 48 percent since 2010 — 14 percent more than the national average — which means that over 18 percent of the Palmetto State’s total population is already potentially eligible for Medicare. This state needs more Medicare funding, not less as Haley is proposing. 

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Sen. Lindsey Graham, Sen. Tim Scott, and the rest of South Carolina’s elected representatives don’t need to listen to Haley and shrink the size of the program to keep it running. Instead, they just need to make it easier for the pro-consumer entities operating in the healthcare supply chain that save our state countless sums of money to do business. 

At the top of the list should be groups known as Pharmacy Benefit Managers (PBMs). These are the companies that the government hires to to stop Pharma from increasing the cost of our drugs. Unions, insurance companies, and private businesses use PBMs for the same purpose. 

Big drug companies may have a lot of leverage to increase drug costs but PBMs have a lot of leverage too. That’s because each PBM manages a significant number of health plans, so each one holds a lot of cards in the drug price negotiation and purchase process.

Fortunately for us, PBMs play these cards well. 

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According to a January 2023 study, “PBMs save payers and patients an average of $941 per person per year,” or “40 to 50 percent on their annual prescription drug and related costs compared to what they would have spent without PBMs.” Overall, they are expected to save plan sponsors and consumers more than $1 trillion from 2020 to 2029.

And fortunately for South Carolina and other states currently facing the Medicare crunch, PBMs have secured particularly high cost-savings for this healthcare program.

Peter Orszag, who served as the Office of Management and Budget (OMB) Director under the Obama administration, said PBMs are “the primary explanation for why Part D in Medicare is costing a lot less than was projected initially.” In 2016, these rebates offset Part D spending by 20 percent, from $145 billion to $116 billion. 

So no, South Carolina’s lawmakers don’t need to cut Medicare spending to protect the program; they just need to do more of what’s working. That means taking on the big drug companies who continue bleeding the people of this state dry. It means using all the legal and political tools available to hold them accountable. And yes, it means giving groups like PBMs more power and authority to continue keeping the drug companies’ costs under control. The residents of South Carolina who depend on Medicare — many of which are retired and on fixed monthly incomes — will thank them later.

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ABOUT THE AUTHOR …

Aurvella Henry is a community leader from Charleston, SC who has resided in Maryville District 42 for 54 years . She is the Vice President of the Maryville Neighborhood Association and has been involved in the Democratic Party since 2006, working in Senate and Mayoral campaigns. She has also worked in get out the vote programs.

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