Posted on 01/26/2016 9:18:54 AM PST by SeekAndFind
If people want some insight into the Donald Trump phenomenon, this issue might make for a good starting point. Trump’s positions on health care have not exactly hewn to Republican or conservative orthodoxy, to be sure, but the polling frontrunner has refused to back down from them. Last night in New Hampshire, Trump stuck to his government-as-arbiter guns, demanding that Medicare leverage its market presence to force pharmaceutical companies to negotiate on price — an option expressly prohibited in the 2003 Plan D program passed by Republicans.
Note how the Associated Press frames this, too:
Trump told an enthusiastic crowd of about 1,000 people packed into a high school gymnasium Monday night in Farmington, N.H., that Medicare could "save $300 billion" a year by getting discounts as the biggest buyer of prescription drugs.
Said Trump: "We don't do it. Why? Because of the drug companies."
Companies generally can set the prices for approved drugs because the US government doesn't regulate medicine prices, as other countries do. The powerful pharmaceutical lobby has repeatedly fended off such proposals that would cut into profits.
Conservative and Republican doctrine on this is that Medicare’s pressure will produce irrational results in a market where consumers already have aggregate power to push prices downward. Ten years ago, Heritage senior fellow Dr. Robert Moffit offered a good overview of this doctrine and an explanation of why consumers should worry about Medicare’s intervention:
When the program started, Medicare officials projected that the average monthly premium would be $37; in fact, it declined to less than $24. Private health plans are securing serious discounts, benefits are generous (especially for poor seniors), and eight out of 10 seniors say they’re satisfied. Private-sector negotiators are doing a good job, and the nonpartisan Congressional Budget Office doesn’t think the Medicare bureaucracy would do better.
Still, some members of Congress say that with 38 million beneficiaries enrolled, the government’s market “clout” as a pharmacy benefit manager would dwarf the private-sector managers already serving Medicare beneficiaries. That’s not the case, however. In 2004 alone, Advance PCS covered 75 million people; Medco Health Solutions covered 65 million, and Express Scripts covered 57 million.
There is, however, one big difference between the Medicare bureaucracy and the private-sector benefit managers: Medicare has no experience managing outpatient drug benefits. Moreover, when government officials do “negotiate” drug prices, it almost invariably means setting a price below the market level, which reduces the supply of drugs or restricts the choice of drugs patients can have. Medicaid routinely restricts access to pharmaceuticals, and the Veterans Administration, often touted as a model for federal drug pricing, also has a restrictive list of approved drugs.
In a recent study for the National Bureau of Economic Research, Joseph Golec and John Vernon, professors of economics at the University of Connecticut, estimate that European drug price controls over the last 19 years resulted in a loss of about $5 billion in forgone R&D spending and 46 fewer medicines. They project that adoption of similar policies in the United States, the world’s major producer of pharmaceuticals, would likewise result in much greater losses of R&D investment and new medicines.
On top of this, Trump’s claims are wildly exaggerated. In 2014, Medicare spent $121.5 billion on Part D prescriptions, and $21.5 billion on Part B (hospitalization coverage) for a total of $143 billion — less than half of what Trump claims he will save. The entire pharmaceutical industry’s sales in the US in 2014 was $377 billion. Trump appears to have little insight into the issue he’s flogging.
However, policy and data are perhaps no longer relevant for most voters. They see institutions as corrupt, and in need of serious and dramatic correctives. The deal on Medicare prescription coverage fits that worldview to a T, putting Big Pharma in the role of beneficiary of governmental inaction, forcing consumers to pay higher and higher prices for drugs. Trump promises to cut through the Gordian policy knots to deliver for the common man, a classic populist strategy, and it works in part because it seems counterintuitive that a major payer of drugs should have no bargaining power at all on price. Why not save a few billion a year, even if it doesn’t amount to $300 billion, especially if it means sticking it to Big Pharma? And who else has the power to fight for the common man, except someone at the top of an even bigger government?
Populism never relies on small-government conservatism. It relies on having the right person in charge of an activist government, benefiting the right people and plaguing all others. And thanks to a failure of institutions to address rising dissatisfaction and resentment (or even to discuss them), populism has become the fashion in both parties.
The super-PAC supporting Ted Cruz attempts to hit Trump from the conservative angle on government-run health care. It’s a good ad for conservatives who care about policy, but …
bkmk
I don't trust Heritage. Sorry, info is right but they pushed Pre-RomneyCare.
“I’m for having zero, absolutely zero involvement with .gov and drugs.”
Government has dug a big hole that Americans have fallen into.
The hole was dug by federal government granted drug patent monopolies which didn’t require drugs to be sold at affordable prices. The hole was made dangerously deep by state governments requiring private insurers pay for FDA approved drugs regardless of price. After drugs were made expensive by state mandates, Medicare was forced to pump in hundreds of billions of federal dollars.
How does one unwind the mess? By asking consumers to pay something, with reasonably affordable contributions based on the value consumers are getting. Future patents and FDA approvals should be conditioned to require individual affordability for all consumers.
He’s STILL acting like a CEO rather than Presidential....that’s all he knows and foolishly believes he can step into the Presidency as a CEO.....smack dab into the Constitution.... “Limiting his power”....
bfl
My wife is a controller/accountant in a rural hospital and TennCare nearly destroyed them. Getting paid .50 cents on the dollar. She told me they had figured for example how much it cost the hospital to xray for a broken arm and these figures are by no means correct. With the xray machine, techs, radiologist, maintenance etc... $100 and they recoup their overhead and make a respectable profit.
In comes Medicare and they say you will accept $35 for this xray period. So right off the bat any profit is gone and they are not even meeting overhead. Medicaid pays even worse! So they have to charge the patients with insurance and paying out of pocket even more to try and recoup losses from the government Medicare/Medicaid.
And the government made the interstate highway system before a lot of people were born. So what?
People act like we wouldn't have electricity and highways if it weren't for the federal government. We'd probably have the best schools in the world if it weren't for government. Government is just promoting our general welfare though, right?
Nothing like big government conservatism.
Total nonsense. Without patent protection you would have no innovation. You come to FR to argue in favor of government mandated price controls without any understanding of basic economics or how the profit motive, and a competitive economy, drives innovation.
It can cost up to $2 billion dollars to bring a NME to market thanks to the beloved government you say should mandate that products be sold at affordable prices. 95% of everything that begins in a pharmaceutical lab never makes it to clinical trials. Of the 5% that do, more than 80% o them fail. One out of every 5,000 new drugs is actually commercialized. Yeah, the drug companies are ripping us off. Let's take your logic, such as it is, to the inevitable conclusion....we need the government to force the food companies to provide food at more affordable prices, and cars, and flat screen TV's...with enough government involvement, we'll never have to pay high prices again. Voila, utopia!
And that may well be but I have private insurance and they also don’t pay the full amount even though it appears the doctors office/hospital way overcharges. The insurance company apparently has a “negotiated price” so who is paying the full amount? People without insurance? The office/hospital never gets paid the full amount?
I used to have a very different type insurance, a high deductible plan with a health savings account. The doctors would give me a 10% discount for cash but it appears I was getting screwed because having private insurance they pay way less than a 10% discount.
The whole thing is screwy.
Healthcare is already heavily regulated and controlled directly or indirectly through Medicare/Medicaid.
Instead of the hodgepodge of corrupt state-by-state 'deals' and patchwork quilt of existing regulations, why not replace it with one open, national set of negotiations where everyone can have their say? And one enormous, national insurance pool (not one company or single payer).
The chance of the Cato Institute's preferred policies being enacted regarding healthcare are about as close to absolute zero as politically imaginable.
I lived under the German healthcare system and it works much better than here, while I find our system a nightmare.
You're misguided for many reasons. First, the idea that government is intrinsically superior to a spontaneous and free(r) market is absurd.
Additionally, the US is the world's largest producer of medical technology and provides varying levels and availability of services Germany can only dream of.
Finally, like it is with so many state managed healthcare systems, the strategic objective in Germany is to reduce supply. We're trying our best to join them, so suggesting that we need to be more like these kinds of systems cannot be justified by anything other than emotions. The healthcare system needs to be subjected to market forces in the worst way, not some national set of negotiations that government lords over. I don't know anything about Cato's solution to our healthcare system, but I think it's not working for you because you have to pay for a larger portion of your care rather than using OPM like in Germany.
I heard the exact same story from Ross Perot, explaining why GM’s purchase of EDS was such a great deal for GM. EDS would save so much money from administrating health care that it would pay the entire price. Perot was dead wrong.
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