I agree with John Stanford’s essay in the Wall Street Journal today that controlling drug prices would slow biomedical innovation and and research. (WSJ 7/2/2020 – see link below.) When you spend less money on anything you will get less of it. But that’s okay. Today, we get more drug research and innovation than we want to pay for.
Most drugs approved by the FDA are required by law to be covered and paid for by Medicare and Medicaid regardless of price! Many are required by law to be covered and paid for by private insurance companies regardless of the price! This is true even when the drug provides little or no improvement over other existing approved drugs! Under such a situation we, of course, get maximum research and development.
If we did the same for space exploration, we would probably already have colonies on Mars. If we did the same for climate change, we would probably already have that problem solved. The point is that development of new prescription drugs is not our only priority, and our ability to pay is not unlimited.
We don’t have anything close to free market capitalism in the prescription drug market in the U.S. Government is already very involved, mostly providing subsidies, protection from competition, and other benefits to drug manufacturers. It is not unreasonable to set a drug price ceiling that is 20% higher than what is being paid by Australia, Canada, France, Germany and Japan. We can always make special exceptions for something like a vaccine against the Covid-19 virus.
Contrary to the Register Editorial on 12/1/2019, we should not add long-term care as a new benefit under Medicare. (See link below to The Register’s Editorial urging Medicare coverage of long-term care.) If we want to solve problems using the force of government, we should do the minimum needed to solve the problem. In this case, the problem is making sure that people receive medically necessary long-term care, not making sure that money is left to people’s heirs.
We currently have a pretty good situation: Many people voluntarily purchase private long-term care insurance. Many others who could afford insurance choose to take a risk and not buy it. Taxpayer-funded Medicaid covers the cost of long-term care for those who are unable to pay. For those in the middle – not on Medicaid, but who would struggle to pay for private long-term care insurance – Medicaid already goes a long way to help them qualify for long-term care coverage. For example, if one spouse of a married couple needs long-term care, the other spouse gets to keep a house and a car and some income, even though Medicaid pays for the long-term care of the first spouse.
The best long-term, sustainable solutions to our problems is to give voluntary, free choice to people and then expect them to be responsible for their decisions. To the extent that we allow our government to force everyone into one-size-fits-all welfare programs, there will be ongoing, unsustainable frustrations, disagreements, and dependency problems.
The Iowa Legislature made the correct decision when they passed the bill that prohibited Medicaid from covering gender transition surgery. One the one hand, it is morally correct and good public policy that our government not discriminate against a people based on their gender identity. On the other hand, that does not mean Medicaid or any other insurance should be required by law to cover gender transition surgery. Proponents of requiring such coverage say that it is medically necessary because of the mental distress that gender dysphoria may cause. But, cosmetic surgery of any type has not been required to be covered just because a person feels bad about the way they look physically.
I’m sure some people feel great mental distress over their teeth being crooked, or their nose being too big, or many other aspects of their body, but that does not mean Medicaid (taxpayers) or other health insurance plans should be required to cover procedures to make people feel better about their appearance. Requiring health insurance plans to cover almost everything makes the makes the cost unaffordable to almost everyone. There is nothing inherently wrong with expecting people to pay their own way for cosmetic procedures.
Thanks to Susan Voss for her thoughtful essay about the complexities of our health care system, and how difficult it is to reduce costs. (See link to Register essay below.) I don’t claim to have “the answer”, but I do suggest that the following cost saving ideas be given serious consideration.
Medicare, Medicaid and private insurance should not be required to cover every new drug, product, or procedure that is approved by the FDA. Some are very high cost but provide only marginal improvement over alternatives that cost much less. Also, at least some covered products and procedures would likely be considered not medically necessary by most people.
Consider shortening the amount of time that government grants a monopoly for patents. Patents are not natural property: humans have copied one another since the beginning of time. Our U.S. Constitution allows patents to be granted to encourage inventiveness, but there is no objective reason why a patent must be granted for 20 years. Why won’t five or ten years work? Maybe the length of the patent should be based on the cost to develop the patented item and whether or not government funds were used to help develop the item.
Don’t require limits on out-of-pocket payments such as co-payments, especially for very high cost items. A person should have “skin-in-the-game” if they expect their insurance to cover very high cost items. Today, we see the opposite: drug companies offer to help pay people’s out-of-pocket costs so there won’t be so much political pressure on them to lower their prices.
Allow both pharmacies and individuals to purchase drugs from sellers in other countries that are “deemed” to have sufficient safety procedures in place. If drug companies are free to charge lower prices in other countries, then pharmacies and individuals should be free to purchase the drugs from those other countries.
Allow Medicare and Medicaid to negotiate with drug companies on prices they pay for the drugs that are covered by the programs. Right along with that, Medicare and Medicaid should be allowed to develop formularies (lists of drugs that are preferred over other therapeutically similar drugs), that give beneficiaries a financial incentive to use the preferred drugs and a penalty for using higher cost drugs.
Our health care wants are unlimited. Our ability to pay is not. We, as citizens, should not expect private insurance or our government health care programs to cover everything, regardless of cost. We should expect our government to NOT do things that increase costs, or reduce our choices.
Today, The Des Moines Sunday Register reported that the bids of the insurance companies that were chosen to manage Iowa’s Medicaid program contained misleading and unverifiable data. (See link below.)
One example you cited was from UnitedHealthcare’s bid, where they stated that their Kansas affiliate reduced premature births by 23 percent from 2013 to 2014. Although it is possible that the efforts by UnitedHealthcare caused this result, it is also possible that the result were caused by random fluctuation.
If you measure 100 health indicators, and the results follow a statistically normal distribution, then a few of the indicators will show significant improvement and a few will show significant worsening, even though there is no real change in long term trends.
It’s just like if you asked 100 investors to each pick a group of stocks by throwing darts at a stock listing. A few would make amazing gains and a few would suffer tremendous losses – none of which could be attributed to the ability of the investor.
In the bids by the insurance companies, all they had to do was “cherry pick” the best statistics after the fact to make themselves look good. So, while the statistics my be true, they are clearly misleading.
The Register advocated for government operated long term care insurance in its lead opinion on 7/15/2013. (“Long-term care policies need attention”) We don’t need or want a government financed program for long term care insurance. President Obama backed out of a government sponsored long term care insurance program when he felt unable to promise that government would not some day step in and require taxpayers to subsidize the plan. We have Medicaid for the poor. That is enough. If anything, our government should encourage people to buy long term care insurance and/or to save for their own long term health care needs. Instead, our government seems content to keep interest rates artificially low so that people will borrow and spend. Low interest rates reduce the returns that insurance companies earn on their reserves, which in turn causes them to increase their long term care insurance rates. Letting interest rates rise to their natural levels would be one of the best ways for government to help improve the incomes of seniors, and help hold down the cost of long term care insurance.
Maybe it would be best to let the Sequestration spending cuts to take effect. It appears that elected politicians are unable to make significant cuts to any specific federal spending items.
If cuts could be prioritized, here would be my short list in order of priority:
The Medicare eligibility age should be coupled with Social Security and they both should be gradually moved to age 70. The federal government should not be responsible to pay for 15 – 30 years of retirement for healthy adults. (see below)
Freeze the dollar amount of federal spending on Medicaid – block grant the money to the states and let States decide on the priorities. There will always be more demand than there is supply for free medical care.
Cut military spending, in actual dollars, by at least 5%. Let the defense department decide on priorities to give us the best defense that the budget can buy. We would still have greatest defense on Earth.
Eliminate the Dept. of Education – leave education to the states entirely.
Limit farm subsidies to $50,000 per farmer maximum, $100,000 per family maximum. Phase out all subsidies for farmers who have a Adjusted Gross Income between $100,000 and $200,000. Require 100% of the cost of crop insurance to be charged to the farmers. Why do we keep paying subsidies to farmers when they have record profits? Something is wrong.
Cut the FEMA budget by 50%, and make States pay a 50% co-insurance payment for all federal money that flows into any State. States would be much more efficient, and there would be much less abuse and fraud.
Eliminate subsidies and special tax breaks for all forms of energy. All energy producers fight to protect their subsidies by claiming that the other forms of energy get subsidies and all they want is a fair playing field. Well, lets make the playing field very fair – no subsidies for anyone.
Eliminate spending on arts, and humanities, public broadcasting, etc. Contributions to these kinds of organizations should be left to charitable organizations.
I’m sure the list would be different and much larger if I took enough additional time.
According to data compiled by the Social Security Administration:
A man reaching age 65 today can expect to live, on average, until age 83.
A woman turning age 65 today can expect to live, on average, until age 85.
And those are just averages. About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95.
Thanks to the Des Moines Register for printing the editorial by Peter Morici on 2/16/2013. (Obama blackmailing taxpayers to stick blame on Republicans – see link below.) President Obama and other politicians and pundits who say the sky will fall if the sequestration cuts are allowed to go into effect are using misleading fear tactics. Politicians at all levels of government who don’t want to see spending cuts always say that the services that will be cut are those that are the most needed and the most visible. Examples include President Obama’s statement in his State Of The Union address: “These sudden, harsh, arbitrary cuts would jeopardize our military readiness. They’d devastate priorities like education, energy, and medical research. They would certainly slow our recovery, and cost us hundreds of thousands of jobs.” Agriculture Secretary Vilsack has warned us that layoffs of food inspector will result in food shortages. A top general stated that troops in Afghanistan will have their stay extended because there won’t be enough money to train replacement troops. Homeland Security Secretary Napolitano said the we should expect increased wait times in airports due to mandatory furloughs of security staff.
As Morici wrote:, “It puzzles me how $85 billion in a $16 trillion economy could make such a difference, especially when tax increases of similar size, implemented on Jan. 1 at the President’s behest, had no such similar effect in his mind.” Why can’t President Obama prioritize the cuts so that less needed services are cut? President Obama got his tax increases on the wealthy as part of the negotiations to extend our borrowing limit. Now is the time for him to take the lead and implement meaningful cuts based on priorities. Everything is not a top priority. Even entitlement changes, such as continuing to raise the normal retirement age for both Social Security and Medicare, should be on the table. The debt that we are piling onto future generations is immoral and unsustainable. It must stop.
Link to Register article: http://www.desmoinesregister.com/apps/pbcs.dll/article?AID=2013302160059
Health insurance should not be considered a “human right” as the Register advocated on 1/31/2013 (Health insurance for poor is a human right). When the term “human right” is used in conjunction with a product or service, such as health insurance, (or food, or shelter, or clothing), it implies that government should use its force to take property from some people to make sure that everyone is provided with that product or service regardless of cost. Rights that require the use of force by government to take from some to give to others are called “positive rights.” Positive rights are only possible if some of the people work, create, and save their property – so that it may be taken and distributed to others.
The kind of rights that are guaranteed by the Bill of Rights of our U.S. Constitution, are called “negative rights.” Negative rights do not require any action by anyone else and do not infringe on the rights or the property of anyone else. For example, I have a right to speak , but you don’t have to listen. I can practice my religion but you don’t have to believe. I can form a union but you don’t have to join. I can open a business but you don’t have to patronize it or work for me. Negative rights are are based on the idea that we are each free individuals who own whatever property we create or acquire honestly and peacefully through voluntary social interaction and cooperation with other people.
The current question is whether or not to expand Medicaid in Iowa. The fact that most, if not all, of the funding comes from the federal government does not make it free for Iowans. Money from the federal government is not “free money.” The more fundamental question is how far do we expand Medicaid. The number of people in Iowa on Medicaid increased by 23% from 2006 to 2010. Today, more than one out of five Iowans are on Medicaid. Of course, many more people would like to be covered by Medicaid. Who wouldn’t like to have someone else pay for their health care? Governor Branstad is correct to not expand Medicaid. Instead, we should make sure that we our current spending is being used as effectively as we can.
As we work to avoid the fiscal cliff and solve our federal budget deficit problem, we need to ask what we Iowans are willing to give up. We cannot solve our deficit problem by only increasing taxes on other people or by only cutting other people’s benefits. Here is a partial list of federal expenditures that benefit Iowans: crop insurance subsidies, ethanol subsidies, wind power subsidies, biodiesel subsidies, Medicare, Medicaid, Social Security, National Guard installations, Silos and Smokestacks national park funding, Harkin grants, student loan subsidies, mortgage interest deductions.
Will you do your part? What cut to your current or future benefits are you willing to accept? If we don’t solve our deficit spending problem, sooner or later we will end up with a crisis like Greece. Contact your Senators and Representative and tell him which of your benefits you are will to have cut.