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CAPITOL PERSPECTIVES I detailed in a previous column, this would undermine the market forces that have successfully controlled cost in Part D, result in pricing distortions and cost-shifting to employers, veterans, and other groups, and could result in shortages seen in other parts of Medicaid. A preferable solution to either higher cost-sharing for LIS beneficiaries or Medicaid rebates on that population would be to strengthen the competitive forces that have already contained costs in Part D. Currently, Part D plans receive a full subsidy up to the average bid of all plans in a Part D region. That means plans can maximize their revenue if they bid at or just below the average. They lose potential revenue if they bid below the area benchmark and lose their opportunity to cover these beneficiaries if they bid above the benchmark. But this formula has resulted in shadow pricing, where plans bid as close to the benchmark as possible without exceeding the benchmark. 1% increase in number of prescriptions filled = Congress could make the LIS program far more efficient if it rewarded plans for bidding low. For example, it could auto-assign more LIS beneficiaries to the plans with the lowest bids; e.g. 50 percent for the cheapest plan, 30 percent for the second cheapest plan, and, 20 percent for the third cheapest. Presently, beneficiaries who do not affirmatively select a plan are auto-assigned randomly, and there is little incentive to bid low and deliver healthcare more efficiently. The old ways of approaching healthcare policy no longer work. Conservatives generally would like to impose more cost-sharing so there is more "skin in the game." Liberals look to price controls, such as arbitrary Medicaid payment rates (i.e. rebates). Competition is a better solution. Congress should be more creative in unleashing competitive forces so that beneficiaries and taxpayers alike can benefit from a more efficient system. 0.2% reduction in Medicare spending on medical services CBO: Rx Use Reduces Healthcare Spending John McManus is president and founder of The McManus Group, a consulting firm specializing in strategic policy and political counsel and advocacy for healthcare clients with issues before Congress and the administration. Prior to founding his firm, McManus served Chairman Bill Thomas as the staff director of the Ways and Means Health Subcommittee, where he led the policy development, negotiations, and drafting of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. Before working for Chairman Thomas, McManus worked for Eli Lilly & Company as a senior associate and for the Maryland House of Delegates as a research analyst. He earned his Master of Public Policy from Duke University and Bachelor of Arts from Washington and Lee University. He can be reached at jmcmanus@mcmanusgrp.com. 12 LifeScienceLeader.com October 2013