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Government Health Care? Don't Bet Your Life on Itby
Peter J. Sepp Jan 17, 2002 Like certain illnesses, bad ideas can prove remarkably resistant to treatment.
Perhaps this explains why the notion of government-run health care, thought
to have been eradicated during the Clinton era, has re-infected state and
federal lawmakers.
Recently, Florida’s Legislature enacted a new
price control law that forces manufacturers to “rebate” even more
of the state’s costs for prescription drugs it subsidizes under Medicaid.
Proponents who hope to adopt this plan nationwide claim that clamping down
on “demon” drug makers will yield savings to consumers. In reality,
the opposite is likely to occur.
Prescription drugs were a big reason why hospital expenditures fell from
43% to 33% as a share of overall health care spending between 1980 and 1998.
Numerous case studies, from Florida’s own AIDS treatment programs to
asthma patients in North Carolina, show that costlier drug therapies result
in net savings over the long
term – due to shorter hospital stays, fewer physician visits, and less
need for surgical operations.
Less expensive medications, on the other hand, can be penny-wise and pound-foolish.
For example, researchers found that although giving workers sedating antihistamines
cost $1.50 less per day than giving them drugs that didn’t induce sleepiness,
the lost worker output from the side effects of the cheaper antihistamine
was $9 per hour.
All told, the National Bureau of Economic Research determined that for every
$1 spent on newer drugs to treat patients in the U.S., other medical costs
dropped by $4. Factor in the red tape physicians would face in obtaining “prior
authorization” for drug therapies not on the government-approved list,
and the savings price controllers seek could prove elusive indeed.
Even more elusive would be the beneficial U.S. medications now sold
in price-controlled “paradises” abroad. Batches of pills may be
cheap to produce, but the research and development that went into them could
normally not occur outside of the U.S., the last major “island” of pricing freedom in the world. As European nations have imposed heavier
lids on prices, America’s lead in life-saving breakthroughs has widened.
This year, 20 of the world’s top 25-selling drugs will be marketed here.
In the end, America’s higher initial costs seem to balance out, once
newly-discovered medicines come off patent. A Wharton University Study that
compared the U.S. with 8 other developed nations concluded that when our greater
utilization of generics was factored in, drug prices here were lower than those in about half the countries studied.
One component of America’s health system where
affordability is a greater issue – insurance – likewise faces
a new threat. In December 2001, Members of Congress resurrected calls for
universal federal medical insurance during debate over an ill-fated “stimulus” proposal that was initially aimed only at those who lost coverage due to unemployment.
What these lawmakers fail to grasp is how both employer- and government-provided
insurance can short-circuit the connection between businesses and consumers
that spurs competition in other insurance markets – like those for automobiles
and homes. When patients have less individual control over the resources they
need to shop around, employee benefit administrators and insurance company
bureaucrats have an even lesser incentive to improve service and cut rates.
How can we re-wire this faulty arrangement and restore power to consumers?
Drug firms like Pfizer, which recently unveiled a “Share Card” discount program for seniors, are already removing the remaining roadblocks
to affordable medicines. Congress can help by lowering the shy-high threshold
for claiming medical expense deductions on tax returns. It should also enact
Rep. Dick Armey’s “FairCare” legislation, which would provide
a personal tax credit to empower the vast market of 40 million uninsured Americans.
Finally, “Medical Savings Accounts” – a tremendously
successful pilot program – should be universal, to let everyone save tax-free for health needs.
Just as the medical community is on alert to fight the spread of deadly diseases,
the political community must now stand up to government health care control
schemes that could poison taxpayers and patients alike. America’s free
enterprise system is a better formula for our well-being.
Pete Sepp is Vice President for Communications with the 335,000-member National
Taxpayers Union, a nonpartisan citizen group based in Alexandria,
VA that works for lower taxes, less wasteful spending, and accountable
government. |
