Government negotiation, raising the price of medicine
So the day after I pick on Schwarzeneggar for trying to turn California into Canada, the U.S. House of Representatives votes to institute price controls on prescription drugs.
No, wait: they said "negotiate" on prices.
The federal government already negotiates with medical providers, as follows: the feds say they'll pay x, and if medical providers accept it, they charge that much -- to government-covered (that is, Medicare, Medicaid, etc.) customers; to everyone else, the providers raise the price to make up the shortfall. If the providers don't accept that amount, they don't take government-covered customers.
For example, when I worked in social services in Indiana, the state issued new Medicaid cards to Medicaid recipients. Rather than simply verifying an identification number on a paper card, providers would have to acquire card-readers to read the magnetic stripe on the new cards. The result? Several of the individuals we served had to find new doctors, because their current ones didn't want the added expense and hassle of the card readers.
Anyhow, there are two ways this proposed "negotiation" would work. One would be to start limiting the choices of Medicare recipients as to the pharmaceutical products they could get on the taxpayer's tab. That's fine with me, because, hell, I'm the one paying for these folks. Alternately, and more likely, the government shall have to pay more than they want, if they want a broad-enough level of coverage for Medicare recipients. Meanwhile, private insurance companies may have a harder time keeping their own costs low, as pharmacies try to recoup lost profits by charging more to non-Medicare customers. And the uninsured? Well, they'll pay the most of all. This has, after all, been the practical effect of government price-setting through Medicare already: inflation in healthcare costs for everybody else. Extending this practice to drugs will make'em more pricey for everybody else. Not to mention that we're all stuck paying to subsidize these freeloaders to begin with.
I find myself in the welcome position of being able to set aside Bush-bashing by saying that I agree with his unwillingness to cause government to "negotiate" drug prices. Oops, out of position, because Bush is the $&*#ing moron who pushed and signed this ridiculous drug benefit to begin with. Sigh. I've said it all before.
No, wait: they said "negotiate" on prices.
The federal government already negotiates with medical providers, as follows: the feds say they'll pay x, and if medical providers accept it, they charge that much -- to government-covered (that is, Medicare, Medicaid, etc.) customers; to everyone else, the providers raise the price to make up the shortfall. If the providers don't accept that amount, they don't take government-covered customers.
For example, when I worked in social services in Indiana, the state issued new Medicaid cards to Medicaid recipients. Rather than simply verifying an identification number on a paper card, providers would have to acquire card-readers to read the magnetic stripe on the new cards. The result? Several of the individuals we served had to find new doctors, because their current ones didn't want the added expense and hassle of the card readers.
Anyhow, there are two ways this proposed "negotiation" would work. One would be to start limiting the choices of Medicare recipients as to the pharmaceutical products they could get on the taxpayer's tab. That's fine with me, because, hell, I'm the one paying for these folks. Alternately, and more likely, the government shall have to pay more than they want, if they want a broad-enough level of coverage for Medicare recipients. Meanwhile, private insurance companies may have a harder time keeping their own costs low, as pharmacies try to recoup lost profits by charging more to non-Medicare customers. And the uninsured? Well, they'll pay the most of all. This has, after all, been the practical effect of government price-setting through Medicare already: inflation in healthcare costs for everybody else. Extending this practice to drugs will make'em more pricey for everybody else. Not to mention that we're all stuck paying to subsidize these freeloaders to begin with.
I find myself in the welcome position of being able to set aside Bush-bashing by saying that I agree with his unwillingness to cause government to "negotiate" drug prices. Oops, out of position, because Bush is the $&*#ing moron who pushed and signed this ridiculous drug benefit to begin with. Sigh. I've said it all before.
posted by heavynettle at 19:26
3 Comments:
He's tan, rested, and ready! Welcome back.
Regarding your post, large-volume retailers often get discounts on large-volume purchasers, and these are justified via the savings the economy of scale gives to the firms the fulfill their orders. So why shouldn't the federal (or state or city) government use good business practices to provide savings for its customers, i.e. the public?
I would submit that if drug companies are dependent for profits on the government continuing to pay non-discounted costs for purchases whose volume would normally earn a discount for a private firm, like Walmart, then the drug companies have actually been benefitting from artificial government price supports--if the government pays full price when a business wouldn't, it's a tax-payer subsidy.
Dang, gotta learn to proofread. That should have read "large-volume purchases.
I don't know about rested. . . .
I have to concede the possibility that the government (meaning the taxpayer) could save money by negotiating discounted rates with pharmacy companies, but that doesn't disregard the effect of those discounts on the prices paid by anyone not on the government plan. When you look at the discounted prices -- to Walmart, to insurance company groups, to Canadians -- you can conclude that pharmaceuticals are brutally overpriced, or that they're not, but it would be tough to conclude that the folks selling the meds think they are. It is unlikely that pharmaceutical companies'll eat the loss in revenue that whatever share of the 43 million Medicare recipients take a given drug, anymore than they did when the Canadian government fixed their prices. I'd imagine Walmart's negotiations have raised the prices for folks not protected by a big insurance group.
The very point of discounts is to entice an extra, but small group of potential consumers to buy one's product. If the overwhelming majority of the market gets the discount, the supplier can't help but raise the price for the rest of the market to recapture the revenue the supplier thinks he should get.
So there is one more eventuality that I didn't talk about, which is embarrassing since it ties into my original title of the post. At some point, the non-insured'll all be covered by Medicare, leaving no part of the market paying the price the pharmaceutical companies think they should get. That'll raise the price even for Walmart, and for the insurance companies, and might cause the system to collapse into a single-payer catastrophe. That's when the government's negotiation shall become price fixing, with all the reasonably foreseeable consequences: shortages, as chunks of the product go to black markets.
When I was in Indiana, there was this funny little game played between Medicaid and doctors. Doctors, claiming Medicaid underpaid, would triple their service fees; Medicaid, assuming doctors overcharged, would pay only a third of the claim amounts from them. Guess who payed the full, tripled service fee.
Post a Comment
<< Home