Sometimes I Feel Like a Piece of Bologna

Medicare Part D Negoiated Prices will Hurt Elderly

The House of Representatives today passed H.R.4, which would require the Secretary of Health and Human Services to negotiate prices with drug companies. The negotiated prices would be standardized across the U.S. for Medicare Part D beneficiaries.

Republican opponents say the bill, which passed 255-170, would actually raise drug prices and retard pharmaceutical competition, putting a crimp in research on new drugs. Actuaries from the Centers for Medicare and Medicaid Services (CMS) agree.

In an OpEd for The Hill, Sally C. Pipes, president and CEO of the San Francisco-based Pacific Research Institute and author of “Miracle Cure: How to Solve America’s Health-Care Crisis and Why Canada Isn’t the Answer” challenges the wisdom of Nancy Pelosi’s “fix” for Medicare Part D. Her article is well worth the read as she points out that negotiating Part D will result in a restrictive formulary and lowered life expectancy.

U.S. Centers for Medicare and Medicaid Services (CMS) Acting Administrator, Leslie Norwalk agrees. She said that the only leverage in bargaining for discounts with drugmakers is to block some products from the list of covered drugs.

They're right. Government involvement in health care has done nothing but increase costs since its passage in 1965. Not because more people are covered, but because when you have such a huge purchaser of any good or service, that purchaser can dictate prices even to the detriment of the supplier.

In health care, Medicare and Medicaid have not covered their costs since their inception. The difference is shifted to private insurers and patients without insurance, resulting in more people without health insurance. And of course, those pockets are not endlessly deep, so we’ve seen providers go out of business as well as a significant increase in overall health care costs.

In the fifteen years following the passage of Medicare and Medicaid in 1965, expenditures for health care in dollars increased nearly sixfold, and health care costs rose from 6 percent to 9 percent of the country's gross domestic product (GDP). In the next 20 years, costs increased another fivefold, and more than doubled as a percent of GDP.

U.S. Health Care Costs
Dollars Percentage of GDP
1950 $12.7 billion 4.5 percent
1965 $40 billion (est.) 6 percent
1980 $230 billion 9 percent
2000 $1.2 trillion 14 percent

Anything the government does to require price negotiation will do more harm than good for both seniors and the rest of us. Medicare Part D is bad now; under the Democratic plan, it will only get worse.

Labels: elderly parents, health care costs, Medicare Part D, universal health coverage