The Real Cost of Green New Scam: Medicare Drained by the Inflation Reduction Act | Phil Kerpen

Full Episode Transcript:

Rebecca Weber: Hello, everyone. I’m Rebecca Weber, and you’re watching Better for America. Today on AMAC’s Better for America podcast, we have the privilege of speaking with Phil Kerpen. He is the president of American Commitment and the Committee to Unleash Prosperity. He is a respected policy expert, economist, and advocate for free market principles.

And Phil is well known for his rigorous data driven analysis that sheds light on complex financial issues affecting millions of Americans. Today we’re going to delve into the critical questions surrounding Medicare premiums, hidden taxpayer costs, and what these changes could mean for the future of our seniors.

It’s great to have you with me, Phil. Thank you for joining the show. 

Phil Kerpen: Rebecca, it’s my pleasure. Thank you. 

Rebecca Weber: So a Mac action has been sounding the alarm on this issue for many, many months, uh, through various calls to action with Medicare and senior welfare, really at the forefront of your work. Can you break down for our listeners and our great a Mac members the specific ways in which the Biden Harris administration’s policies.

Particularly under the IRA, the Inflation Reduction Act, how have they impacted Medicare premiums and then how do those changes really affect seniors directly? 

Phil Kerpen: Well, the so called Inflation Reduction Act, uh, maybe the most misnamed bill since the Affordable Care Act, since it did the opposite of what its name said, um, it really was an attack on Medicare.

And, uh, it’s quite shameful that AARP endorsed it and supported it and pushed for it. And I think they did that because of all the money they make from their relationship with UnitedHealth, which, you know, they make billions of dollars. Triple from united health what they make from from their membership fees.

It’s extremely lucrative. It’s in the billions And the insurance industry really liked this bill because it had supersized obamacare subsidies in it tens of billions of dollars Paid directly to the insurance companies. So they were big winners in this bill The other big winners in this bill are the renewable energy industry wind and solar the electric vehicle industry They all got billions and billions of dollars of subsidies.

Well, how did the bill pay for? You All of that government spending all of those giveaways. It really had two ways two principal ways that it paid for all of that one Uh was doubling the size of the irs hiring 87 000 new irs agents to go shake down and harass and audit people and You know democrats said that’s about going after the rich, but the rich have Tax lawyers and accountants.

They’re probably not going, you know, they’ll have an unpleasantness. Maybe if they’re targeted, but they’ll be fine. It’s really the small business people who are going to get hammered because you get a bill in the mail from the IRS says we want a few thousand more dollars. Most people. Who don’t have an account in their tax where they just pay it because it’s not worth it to fight.

It’s going to cost you more to fight it. And so that doubling of the IRS was one way they paid for it. But the other huge pay for in the Inflation Reduction Act, the way they got the money for the, you know, the Obamacare subsidies and the green energy giveaways and so forth is they use Medicare as a piggy bank.

They slashed prescription drug spending in Medicare. By about 260 billion. And, uh, you know, we can talk about the ways they did that with price controls and restructuring, and there are a variety of different mechanisms. And, you know, some people might say, Hey, price controls are great. I think they’re a very bad policy for reasons we can get into.

But what I think 90 percent plus of people can agree on is if you’re going to cut Medicare prescription drug spending by 260 billion, that money should have been kept in Medicare. To shore up its finances or it should have been passed on to seniors and they really did neither of those things. So they brag about, uh, the savings to seniors of the caps that are in there and of the price control mechanisms, but they really amount to very, very little money.

It’s something like 20 per medicare enrollee per year that they’re bragging about. While at the same time, uh, you know, they’re causing premium increases that are much much more than that And so the average senior comes out way behind, uh in terms of the impact of this the real savings the real benefit the value Is not to seniors It’s the politicians who got to take that money out of medicare drug spending to spend on all of those other things Which I really think is indefensible And you know, it’s and the thing that drives me completely insane is the democratic politicians who voted to do this Are out there every day attacking republicans for wanting to cut medicare and it’s like, you know, you actually did it Yeah, you used it as a piggy bank for this unrelated spending.

So I know i’m rambling a little you probably didn’t want such a response But that’s that’s our view. Basically. 

Rebecca Weber: This is a really good response if I could break it down essentially what they did with this through this program Uh is they’re padding the pockets of the insurance companies to keep premiums artificially low right before an election I mean, that’s, that’s how well, that’s 

Phil Kerpen: the, uh, that’s the next year that dropped, uh, is, you know, one of the, because of the changes that they made to Medicare Part D, um, they, they basically told the plans, they basically told the plans.

You know, you’ve got to find another way to come up with the money to cover your drug benefits because you can’t get the money Uh, you can’t get the money from the drug companies anymore essentially and so what the drug what the plan says Okay, we need to raise premiums. And so they all all filed these huge premium increases And the average for this current year was about a 20 percent increase.

It was probably going to be about 50 to 100 percent for next year. And those, you know, the people get those notices right around now. And so the Democrats kind of knew this was going to happen before the election. It was a foreseeable consequence. Of what they did in inflation reduction act. And so in order to survive politically to get through this election, what they basically did is they said, okay, so we took 260 billion out of Medicare.

We’re going to put about 20 billion back in specifically to pay the insurance companies to buy down premiums. To hide the impact of inflation reduction act to get us past this election And they really abused their legal authority to do this. They called it a demonstration program I don’t know what they’re trying to demonstrate except that you know when you bribe companies not to uh, You know when you bribe companies to hide the cost of your own policies, you know, they’ll say yes.

Thanks I mean, it doesn’t demonstrate anything but they’re using a demonstration program authority essentially to temporarily Put back some of the money they pulled out to hide the impact before the election. 

Rebecca Weber: All of this is bad. I mean, everything from price controls and price fixing, it’s bad in the long run.

You know, we see fewer drugs coming to market when that kind of thing happens, when we don’t let the free enterprise system work. I mean, the uh, Congressional Budget Office, they report, Uh, that this cost shifting policy is going to push Medicare costs onto taxpayers. Can you elaborate on the long term financial repercussions this could have, especially on future Medicare, Medicare, uh, beneficiaries?

Phil Kerpen: Well, there are a lot of different, there are a lot of different kind of moving pieces in what you just asked. You know, first of all, the price controls will definitely result in fewer new drugs being developed, fewer cures being developed. And they really. Uh, the way they structured this with basically they’re going to put price controls on 10 drugs.

Um, it really changes the incentive for research because now you don’t want that huge blockbuster drug maybe that cures a disease or is a really good game changing drug because if your drug is too successful. You’re gonna get whacked with the price control and you’re not gonna get a return on investment.

So now the incentive for medical research is you don’t go for the home runs, especially because you’re gonna have a lot of failures for every time you go for a home run. You need to get those massive returns to justify all those failures. But the incentive now is kind of, You know, go for a single, right?

Go for a slight improvement over an existing drug and trying to instead of trying to go big and solve a major problem. And so we’ve seen a big decline in particular in cancer drugs, research has declined dramatically. We’ve seen a lot of trials be canceled as a direct result of that change in incentives.

And in the long term, that’s actually very negative. For medicare finances, um, because if you have fewer new drugs being developed new cures being developed You’re going to spend a lot more on long term care on hospitalization on other things That are more expensive than it would be if we actually cured a disease if we actually had a major breakthrough Uh, which uh, you know Those new breakthrough drugs are expensive for a while because you got to have a return on investment of developing and so on Uh, but they’re generally less expensive being uncured.

Uh, and the price comes down over time because eventually they’re off patent, you get generic competition, you get competitive drugs sometimes, even when they’re still under patent. And so the way they’ve distorted the market is going to have very negative effects, I think, on people’s lives and health, but also ultimately on the finances as well, because cures are so beneficial financially relative to treating uncurable conditions.

And so I think that hurts the finances as well. to the program. But, you know, I think the biggest problem from from my perspective, the biggest problem in what they’re doing is if you can get away with using Medicare as a piggy bank for unrelated government spending, you’re going to go back to that well again and again and again.

And, uh, they’re not going to stay with just price controlling 10 drugs. They’re going to Post price controls on more drugs. They’re going to expand this over time. They’re going to say, you know, if we can get away with it, every time we need to pay for, for the next round of giveaways to whatever industry it is, we’re going to go back to that well of using Medicare as our pay for.

And if you do that, you’re going to destroy the finances of the program. And you’re going to keep moving up the insolvency, the insolvency date for those trust funds. You’re going to keep kind of undermining the finances of the program. And this idea that you can just push the costs out onto plans. Well, that doesn’t work either because then you get rising premiums.

And the other thing that you see is you get exit, you get companies say, we’re not going to offer parking plans anymore. We’re not going to offer Medicare advantage plans anymore with an integrated drug benefit. And then seniors have fewer choices and then you have less competition and then, and then prices can rise that way as well.

You know, one of the consequences we’ve seen with inflation reduction act, just getting off drugs for a second. You know, we’ve seen a lot of the Medicare Advantage plans say we’re not covering provider networks that we used to cover last year. And so you’ve got a lot of people right now that are getting letters in the mail finding out, hey, the way that they’re dealing with the changes in Inflation Reduction Act, the way that they’re trying to save costs to deal with those changes is I can’t go to the health system that I’ve been going to forever.

On the insurance plan that I’ve been on and now you need there need to find a new plan or you got to change all of your providers. And so they’ve caused massive upheaval and, um, the, the thing that I find now, I’m almost stream of consciousness. So I apologize, but I got to get to this. They got rid of the rebate rule, uh, that the Trump administration had in.

And this should have been one of the most common sense, easy changes you ever could have made in Medicare Part D. We’ve got these huge rebates, uh, you know, when you buy a drug and you’re paying that you’re 25 percent copay at the counter, you’re paying 25 percent of the list price while the list price is a fake.

Price. The pharmacy did not pay the list price. The the wholesaler did not pay the list price. The insurance company did not pay the list price. They paid a net price net of rebates that are sometimes 50, 60, 70 percent. But they use this fictional list price to make you pay that 25 percent copay. And one of the things that Trump wanted to do is want to say he is he actually issued a rulemaking that said, look, if You’ve got to base the copay on the actual real price.

If you’ve got discounts or rebates, you’ve got to include that. You’ve got to base the copay on the net price, not on this fictional, imaginary list price, because the way it works now and the insurance company negotiates with the drug manufacturer, they want the price to be, both of them want the price to be as high as possible because they can push as much cost as possible onto the senior at the pharmacy counter.

So instead of a negotiation of, Hey, we want a lower price, the insurance companies say, Hey, what we want is a higher price. And a higher rebate because then we can charge the copay based on the higher price and we can pocket the rebate. Well, Trump said, you can’t do that anymore. Any discounts or rebates need to be passed on the pharmacy counter.

Well, you know, 1 of the implications of that is people pay a lot less than copay the way that the, the way that the risk orders and the other risk adjustment structures in part D work, the government pays a little bit more. And so this was a win for seniors, but it was a loss for seniors. The government, it was a loss from the kind of the taxpayer perspective.

You had to find a way to come up with that money. And so when they use this as a pay for one of the things they did in inflation reduction act is they said that rebate rule. And by the way, they’re only allowed to do this, this scheme. Where they use this fictional list price because they have an exemption from the federal anti kickback statute.

No other government program could you go to your supplier and say, Hey, charge me a higher price and give me a big rebate that I can pocket and divert the profits that would be considered an illegal kickback. You’d go to jail for it, but they’ve got an exemption from the federal anti kickback statute.

So the Trump rule ended that exemption would have forced them to pass on discounts and rebates at the point of sale inflation reduction act delayed the effective date of that Trump rule. By eight years. And so in theory, it’s still coming, but instead of coming in 2024, now it comes in 2032. And I’m sure they’ll delay it again and delay it forever, uh, if they remain in power.

So that’s the other extremely, uh, disturbing thing, uh, from the perspective seniors that was in this law. 

Rebecca Weber: Yes, I mean, you’ve, you’ve really highlighted so many important things, you know, fewer drugs to market, uh, results in, in more unhealthy people and the more unhealthy people are, results in higher health care costs, uh, that is so true, uh, you know, padding the pocket of insurance companies, uh, in order to get through an election is, uh, just seems like a total violation.

I know that Rand Paul has brought this up. He thinks it could be a violation of the Hatch Act. Um, And the good things that 

Phil Kerpen: I think it’s a violation of the U. S. Constitution. There you go, because they’re spending tens of billions of dollars basically to cover up the harm that their bill did when they pulled all that money out.

I mean, if you want to admit that you made a mistake You need to pass legislation to fix the law that you passed, not just have the administration declare it a demonstration program and shovel money out the door to get through an election. 

Rebecca Weber: Yeah. And you know, it is very complex, you know, the nature of Medicare funding.

Uh, this is, it’s, I feel terrible. This is why we do this show, sir. This is why, uh, AMAC. Newsline is posting much content around this issue because there’s got to be adequate transparency uh, for the American public so that they can understand how they are out reallocating funds instead of putting out a memo saying, you know, hooray, your rates, you know, are going to remain flat.

You’re not getting an increase or you’re getting a decrease when in fact here at AMAC we have a Medicare sole, uh, Medicare advisory service and we’re helping people and we see fewer plans. We know a major player pulled out of offering Part D, uh, plans. So. Uh, you know, what would you suggest, uh, happens to ensure better accountability for the long term, you know, health, health of Medicaid, the Medicare program?

Phil Kerpen: Well, um, I’m so glad to be joining you because I think the biggest problem that we have on all of these health care policy issues is the malign influence of AARP and they’ve become basically an advocacy arm of the health insurance industry. Uh, they, Exclusively only sell United Health plans and they skim 5 percent off the top of every monthly premium of every ARP branded United Health plan for the whole time you’re in it.

And by the way, this is the only junk fee that Biden and the Democrats like, because so much of that money goes into democratic politics and advocacy and goes to feeding the cycle and, uh, you know, they’ve become the main outside group supporting policies that are actually harmful. 

Rebecca Weber: Yes, 

Phil Kerpen: and supporting in particular this inflation reduction act, which obviously didn’t reduce inflation, but did have a huge rate on on Medicare’s finances and on kind of the incentives for, you know, innovation with new drugs and it’s I don’t see how any legitimate seniors organization could behave the way that they did.

And so, I mean, the number 1 best thing that you can do to solve this problem and related problems is. You know, to quit AARP forever and join a group that actually represents the interests of seniors like yours. And so that’s so critical. That’s so crucial. Because as long as they can weigh in as the 800 pound gorilla in these policy debates in Washington, we’re going to keep having bad outcomes.

Because they have, they have bad interests that are contrary to the interests of seniors. That is absolutely critical. That’s probably the number one most important thing. Beyond that, look, we’ve got to support the politicians who opposed the Inflation Reduction Act. We’ve got to punish the ones who voted for it.

There’s got to be some political accountability. Uh, you know, the, these people, deserve to lose their they deserve to lose they deserve to lose re election if they supported this policy and they’re out there bragging about you know how wonderful it is I just find it insane you know you watch the you turn these things on they celebrate the anniversary of passing and they say well we’re going to uh have two and a half billion dollars of rebates to seniors and you’re like okay but you took 200 billion out of Medicare to pay for unrelated spending.

And so just the magnitude of sort of what they gave back versus what they took out is, uh, I, I find it just astonishing that they’ve been so shameless about misrepresenting what this law did. And, you know, I just think. You know, we’ve just got to stay engaged and I don’t know exactly what the next round of, uh, Medicare reform or the next round of health care more broadly is going to look like.

It depends a lot on what the balance of power is in Washington, but we’ve got to stay engaged through groups that actually represent the interests of the public. Citizens and of seniors in particular and uh, you know, we we’ve got to bring Pressure to counter what’s coming from the left and you know I think the number one thing for medicare in particular the number one thing that we just need to say over and over and over Is do not use medicare as a piggy bank for unrelated spending Do not take if you really think you can find savings in medicare keep it in medicare Do not use it as a piggy bank for green energy giveaways or unrelated stuff or whatever, because I’ll tell you, we’ve done a few rounds of polling on this and almost everyone agrees with that.

Almost everyone agrees. If you can find savings, they got to, they have to stay in the program, not be used as a pay for, for unrelated stuff. So that’s the message I would really focus on. 

Rebecca Weber: Yeah, and I appreciate you saying that, really pointing that out here at AMAC. We are entirely committed to ensuring the solvency of both Social Security and Medicare for our seniors.

And it’s important for our listeners to know that, yes, AARP did back the Inflation Reduction Act. They backed Obamacare back when Obama was in office. They’ve backed so many other radical policies that have been harmful to seniors. Uh, and we are sounding the alarm. We have a great article on amac. us. You can go ahead and look that up.

Bye. I’ve published my own piece on this issue. Very passionate about this issue and Phil, you have done a terrific job really getting into the data and, and just explaining things in a way that we can all understand. I thank you so much for joining me on today’s show and I really hope to have you back with me again once we know who’s, uh, you know, who’s running the ship, uh, and, and prayerfully we’ll have some better leadership.

We’ve got to make sure that we protect our seniors for sure, but thank you, Phil. This was really a great opportunity to learn more. 

Phil Kerpen: Oh, my pleasure. Anytime. 

Rebecca Weber: And to all of you out there listening, be sure to join or renew your membership with AMAC. There is strength in members. The more members we have, the more power we have in Washington.

Phil said it. It’s the 800 pound gorilla against AMAC. We’re over 2 million members strong. Imagine the work that we can do if we grow to 10 million members. We need you to join us so we have a bigger voice in Washington, on Capitol Hill, and in the states. That’s all for today. I’m Rebecca Weber. Thanks again for joining.

Have a blessed day and we’ll see you back again next time. Bye bye, everyone.