How Should the Government Negotiate Medicare Drug Prices? A Guide for the Perplexed




Now, at last, thanks to the Inflation Reduction Act (IRA), the federal government will be allowed to negotiate a “maximum fair price” for drugs covered by Medicare Part D. This historical change, taking place in the face of intense industry opposition, incrementally reverses policies that have prohibited the government from engaging in price negotiations since Medicare Part D was first established in 2003. While only ten drugs will be subject to negotiation in the first year of the IRA and 90 over the first five years, negotiations are now ongoing.


It has been suggested that the government should negotiate for value-based pricing that would benchmark the Medicare Part D price measures of the health benefit provided to those using these drugs. This would be analogous to the approach currently used by most European countries for drug pricing. We believe this approach is inadequate and fails to provide the public with a return on the massive US government investments in biomedical research related to these drugs that enabled these products to be developed and commercialized in the first place.


In our new INET working paper, we extend these analyses to the ten drugs selected for Medicare price negotiation in the first year of the IRA. Our analysis reveals that the NIH spent $11.7 billion on basic or applied research related to the drugs selected for Medicare price negotiations, representing a median investment cost of $895.4 million per drug and, by making this research available to industry, saving industry a median of $1,485 million per drug. While data on industry investments in these ten drugs is not publicly available, this level of NIH investment is comparable to reported investment by industry in the drugs approved from 2010 to 2019.

Paper PDF:

Author(s): Fred Ledley

Publication Date: 4 Mar 2024

Publication Site: Institute for New Economic Thinking

COVID-19 Had a Devastating Impact on Medicare Beneficiaries in Nursing Homes During 2020




The overall mortality rate in nursing homes rose 32 percent in 2020. The pandemic had far-reaching implications for all nursing home beneficiaries, beyond those who had or likely had COVID-19. Among all Medicare beneficiaries in nursing homes, 22.5 percent died in 2020, which is an increase of one-third from 2019 when 17.0 percent of Medicare beneficiaries in nursing homes died. This 32-percent increase amounts to 169,291 more deaths in 2020 than if the mortality rate had remained the same as in 2019. Each month of 2020 had a higher mortality rate than the corresponding month a year earlier.

Almost 1,000 more beneficiaries died per day in April 2020 than in the previous year. In April 2020 alone, a total of 81,484 Medicare beneficiaries in nursing homes died. This is almost 30,000 more deaths—an average of about 1,000 per day—compared to the previous year. This increase in number occurred even though the nursing home population was smaller in April 2020. Overall, Medicare beneficiaries in nursing homes were almost twice as likely to die in April 2020 than in April 2019. In April 2020, 6.3 percent of all Medicare beneficiaries in nursing homes died, whereas 3.5 percent died in April 2019.

The mortality rates also rose at the end of 2020. In November, 5.1 percent of all Medicare beneficiaries in nursing homes died, and in December that increased to 6.2 percent. Again, these rates are markedly higher than the previous year. In November 2019, 3.6 percent of all Medicare beneficiaries in nursing homes died, and, in December 2019, 3.8 percent did.

Author(s): Jenell Clarke-Whyte and team

Publication Date: June 2021

Publication Site: Office of Inspector General, HHS

Trends in Mandatory Spending




In FY2023, mandatory spending accounts for an estimated 63% of total federal spending. Social Security alone accounts for about 21% of federal spending. Medicare and the federal share of Medicaid together account for another 25% of federal spending. Therefore, spending on Social Security, Medicare, and Medicaid now makes up almost half of total federal spending.

These figures do not reflect the implicit cost of tax expenditures, which are revenue losses attributable to provisions of the federal tax laws that allow a special exclusion, exemption, or deduction from gross income or provide a special credit, a preferential tax rate, or a deferral of tax liability.8 As with mandatory spending, tax policy is not controlled by annual appropriations acts, but by other types of legislation.

Author(s): Congressional Research Service

Publication Date: last updated 7 Nov 2023

Publication Site: U.S. Congress

A Huge Threat to the U.S. Budget Has Receded. And No One Is Sure Why




For decades, runaway Medicare spending was the story of the federal budget.

Now, flat Medicare spending might be a bigger one.

Something strange has been happening in this giant federal program. Instead of growing and growing, as it always had before, spending per Medicare beneficiary has nearly leveled off over more than a decade.

The trend can be a little hard to see because, as baby boomers have aged, the number of people using Medicare has grown. But it has had enormous consequences for federal spending. Budget news often sounds apocalyptic, but the Medicare trend has been unexpectedly good for federal spending, saving taxpayers a huge amount relative to projections.


Some of the reductions are easy to explain. Congress changed Medicare policy. The biggest such shift came with the Affordable Care Act in 2010, which reduced Medicare‘s payments to hospitals and to health insurers that offered private Medicare Advantage plans. Congress also cut Medicare payments as part of a budget deal in 2011.

But most of the savings can’t be attributed to any obvious policy shift. In a recent letter to the Senate Budget Committee, economists at the Congressional Budget Office described the huge reductions in its Medicare forecasts between 2010 and 2020. Most of those reductions came from a category the budget office calls “technical adjustments,” which it uses to describe changes to public health and the practice of medicine itself.

Older Americans appear to be having fewer heart attacks and strokes, the likely result of effective cholesterol and blood pressure medicines that became cheap and widely used in recent years, according to research from Professor Cutler and colleagues. And drug makers and surgeons haven’t developed as many new blockbuster treatments recently — there has been no new Prozac or angioplasty to drive up spending. (Medicare is currently barred by statute from covering the new class of expensive anti-obesity drugs.)


Medicare may even wind up saving money because of Covid-19 — because the older Americans who died from the disease tended to have other illnesses that would have been expensive to treat if they had survived, according to an analysis from the Medicare actuary.

Author(s): Sanger-Katz, Margot; Parlapiano, Alicia

Publication Date: 5 Sept 2023

Publication Site: NY Times

Small Town and Rural Hospitals Are at Risk of Closing due to Funding


pdf report:



Things are changing more rapidly. Smaller hospitals are under an attack of high costs and less revenue. As a result, many are closing leaving the small town and rural residents without medical care or having to drive long distances in emergencies. As reported by Healthcare Quality and Payment Reform:

Many people across the country could not receive hospital care in their community when the pandemic began. Over 150 rural hospitals closed between 2005 and 2019. An additional 19 rural hospitals closed in 2020, more than any year in the previous decade. The closures are not resulting from the pandemic, but by financial losses in previous years. Ten more rural hospitals closed in 2021 and 2022. The closures decreased in 2019 due to the special financial assistance hospitals received during the pandemic. The pandemic aid has ended and closures are likely to increase.

Hundreds of Hospitals are at Risk of Closing

Six hundred rural hospitals or ~ 30% of all rural hospitals in the country are at risk of closing. At risk because of the serious financial problems, they are experiencing:

Author(s): Center for Healthcare Quality and Payment Reform

Publication Date: 7 Jun 2023 on blog, accessed 14 Jun 2023

Publication Site: Angry Bear Blog

Social Security Surplus Will Run Out in 10 Years, Report Estimates



Social Security’s reserves are projected to run out in 2033, according to a new report, at which point the entitlement program’s trust fund will be able to pay out just 77% of benefits to seniors.

That estimate is a year earlier than what was stated in the 2022 report for the Old-Age and Survivors Insurance (OASI) Trust Fund, according to the annual report released Friday from the trustees of the program. The revision reflects a 3% reduction in labor productivity and gross domestic product.

One bright spot: A projection for a key trust fund for Medicare is better. It’s expected to exhaust its reserves by 2031, three years later than reported last year, after new data forecast lower health-care spending.

Author(s): Janna Herron, Yahoo Finance

Publication Date: 31 March 2023

Publication Site: Wealth Advisor

The federal budget outlook


PDF of report:



The basic story is familiar. Low revenues coupled with rising outlays on health-related programs and Social Security drive permanent, rising primary deficits as a share of the economy. Net interest payments also rise substantially relative to GDP due to high pre-existing debt, rising primary deficits, and gradually increasing interest rates. Unified deficits and public debt rise accordingly.

Under current law for the next 10 years, the CBO’s projections imply that persistent primary deficits will average 3.0% of GDP. Net interest payments will rise from 2.4% of GDP currently to 3.6% in 2033, an all-time high. The unified deficit, and even the cyclically adjusted deficit, will exceed 7% of GDP at the end of decade. Debt will rise from 98% of GDP currently to 118% by 2033, another all-time high.

Over the following two decades, the projected trends are even less auspicious. Primary deficits rise further as spending on Social Security and health-related programs continue to grow faster than GDP and revenue growth remains anemic. The average nominal interest rate on government debt rises to exceed the nominal economic growth rate by 2046, setting off the possibility of explosive debt dynamics.  By 2053, relative to GDP, annual net interest payments exceed 7%, the unified deficit exceeds 11%, and the public debt stands at 195%. All these figures would be all-time highs (except for deficits during World War II and in the first two years of the COVID-19 pandemic) and would continue to grow after 2053.

Author(s): Alan J. Auerbach and William G. Gale

Publication Date: 14 Mar 2023

Publication Site: Brookings

Canada’s Health Care Crisis Is in Large Part a Labor Crisis



Canada’s system of Medicare — a point of national pride — was strained before the COVID-19 pandemic hit. It’s now teetering on the brink, with some Conservative provincial leaders salivating at the prospect of privatization.

For months, provincial premiers have been demanding that the federal government increase health transfer payments. Indeed, the cost-sharing model which sees the federal government currently kick in around 22 percent of health funding should be revised so that Ottawa pays more of the bill. Although a deal to boost federal funding appears to be in sight, Prime Minister Justin Trudeau and the Liberals are failing to ensure that protecting public health care delivery is a part of it.


Canada’s health care crisis is in large part a labor crisis. In general, unceasing anguish over a generalized “labor shortage” in Canada has had only the most tenuous relationship to reality. In the health care sector, however, worker burnout and a consequent lack of staff are all too real. While the Canadian Federation of Independent Business, the mouthpiece of Canadian employers, bemoaned a purportedly economy-wide labor shortage that was crippling business, an actual dearth of nurses and other health care professionals snowballed as deteriorating pay and working conditions drove these workers out of their jobs.

Newly released Statistics Canada payroll data helps paint the picture. Overall payroll figures show year-over-year employment across the whole economy virtually unchanged in November 2022, despite the Bank of Canada’s aggressive series of interest rate hikes (how much longer stable employment numbers will persist is debatable). Job vacancies — the bugbear of employers in Canada for most of the past year — declined another 2.4 percent, down to 850,300 from 1,002,200 at their peak, and reached their lowest post-pandemic level since August 2021. Average weekly wage growth, while continuing to lag inflation, ticked upward slightly to 4.2 percent (5.3 percent in goods-production alone).

Author(s): Adam D.K. King

Publication Date: 1 Feb 2023

Publication Site: Jacobin

Fight to Rename ‘Medicare Advantage’ Gets New Push



Rep. Mark Pocan and two colleagues are reviving a fight to take “Medicare” out of the name of the Medicare Advantage program — and, this time, they have a YouTube that looks like a parody of a Medicare Advantage TV ad.

The Wisconsin Democrat introduced the new version of the Save Medicare Act bill today, together with Reps. Ro Khanna, D-Calif., and Jan Schakowsky, D-Il..

The sponsors are promoting the position that “only Medicare is Medicare,” and that a Medicare Advantage plan may fail to provide the care that an older Medicare enrollee might need.


The bill would rename the Medicare Advantage program and prohibit Medicare Advantage plans from using the word “Medicare” in plan titles or ads.

The Pocan-Khanna-Schakowsky bill is a new version of H.R. 9187, a bill that Pocan and Khanna introduced in the 117th Congress. That bill had a total of four co-sponsors, all Democrats.

H.R. 9187 died in the House Energy and Commerce Committee and the House Ways and Means Committee at a time when Democrats controlled the House.

Author(s): Allison Bell

Publication Date: 1 Feb 2023

Publication Site: Think Advisor

How Medicare Advantage Plans Dodged Auditors and Overcharged Taxpayers by Millions



A review of 90 government audits, released exclusively to KHN in response to a Freedom of Information Act lawsuit, reveals that health insurers that issue Medicare Advantage plans have repeatedly tried to sidestep regulations requiring them to document medical conditions the government paid them to treat.

The audits, the most recent ones the agency has completed, sought to validate payments to Medicare Advantage health plans for 2011 through 2013.

As KHN reported late last month, auditors uncovered millions of dollars in improper payments — citing overcharges of more than $1,000 per patient a year on average — by nearly two dozen health plans.

Author(s): Fred Schulte and Holly K. Hacker

Publication Date: 13 Dec 2022

Publication Site: Kaiser Health News

Will Democrats Try Cutting Social Security and Medicare After a Disastrous Midterms?



Days after Obama lamented Democrats’ 2010 electoral “shellacking,” his commission released a plan to slash Social Security benefits and raise the program’s eligibility age. Economist Paul Krugman noted at the time that the commission also suggested using newly gained revenue to finance “sharp reductions in both the top marginal tax rate and in the corporate tax rate.”

The plan ultimately did not receive the fourteen commission votes it needed to move forward, and a few years later in 2012, the House voted down a version of the proposal. That didn’t stop the Obama-Biden administration’s push: right after winning reelection — and after cementing much of the George W. Bush tax cuts — they tried to limit cost-of-living increases for Social Security, to the applause of Republican lawmakers.


Like Obama, Biden campaigned on a promise to protect Medicare and Social Security. But as we have reported, Biden is already affirming big Medicare premium increases and accelerating the privatization of that health care program. Biden also has not pushed to fulfill his promise to expand Social Security, even though there is new Democratic legislation that would do so.

And now with Graham’s comments, Republicans are banking on him becoming the old Joe Biden on Social Security if they win in November.

It’s not an insane political bet. After all, Biden for decades proposed cuts and freezes to Social Security and publicly boasted about it. Indeed, Biden spent most of his career depicting himself as an allegedly rare and courageous Democrat who was willing to push off his party’s base and tout austerity.

Author(s): David Sirota

Publication Date: 16 Jun 2022

Publication Site: Jacobin

As our entitlements crisis gets closer, a solution moved farther away



The annual Social Security trustees report is once again upon us, and this year it actually bears some good news: The projections give us an extra year before the trust fund is exhausted in 2035.

At least, this sounded like good news when I first heard it. Then I remembered that I have been writing about these trustees reports for more than 15 years. When I started, all these projections sounded comfortably far off — we had decades to fix the problem! Now we have 13 years. And in all that time, we have done nothing at all, except watch the date of insolvency advance.

In 2008, it was 2040, and the people likely to be worst affected — those who would be eligible to retire just as the trust fund was exhausted — were 35. Now, the people facing the most disruption are 54, much closer to retirement than to their college graduation.

In the meantime, the politics of fixing America’s old-age entitlements has gotten considerably worse.

Author(s): Megan McArdle

Publication Date: 9 June 2022

Publication Site: Washington Post