MPT WWW
Leading policy-makers and scholars explain how market forces, deregulation, and consumer choice can work to improve health care for all Americans.

Commentary

A Sucker Is Born
St. Louis Post-Dispatch, 7-3-06

In this op–ed from the St. Louis Post–Dispatch, the writers decry the inability of the federal government to negotiate lower drug prices under the Medicare drug plan. Citing the success of the VA in controlling prices as a deep contrast to the failing Medicare system, the article calls for a drastic overhaul of the Medicare system that would entail a Canadian–style single payer system covering every American citizen.

The shame here is that the federal government has a proven ability to negotiate deep discounts on drugs: The Veterans Administration does it every day. A survey this month by Families USA showed that the VA is getting much lower prices than the private plans offered under the new Medicare plans. The median difference was 46 percent. Given the size of Medicare, it undoubtedly would get even better discounts if Congress had allowed it to bargain for them.

All this is further evidence of the broken economics of American medicine. It is the antithesis of capitalism. The normal price restraints of a free market fall apart in a system in which medical providers and patients can pass bills along to thousands of private insurance plans and the government. That's a formula for bureaucracy and escalating prices. Yet medical care is so expensive that no one can afford to get sick unless she has insurance.

The current system enshrines waste in ways well beyond drugs. It pays doctors well for treating illness, but pays them poorly for dispensing preventive care. The result is sicker patients who need more procedures at higher cost.

The answer, as we've said before, is a tax–financed, government–regulated, single–payer health insurance system that covers everyone. Only such a plan would have the power to enforce financial discipline and ensure good care.

We think this is the case of diagnosing a burning house and then offering to fix it by throwing gasoline on the fire. The VA is a very small program that operates under unique circumstances designed to benefit our nation's defenders. Creating one large, single purchaser for all U.S. healthcare services would just exacerbate the bureaucratic, third party woes the Dispatch is most concerned about. We should also note that according to this logic, the government can get cheaper prices for everything through its enormous bargaining power, so why not let the government buy housing and food too—aren’t those critical human rights?

Before declaring the demise of capitalism in healthcare, the Dispatch should broaden its sights. Canada’s single payer system is in the midst of its own crisis, as is the NHS in Great Britain. Most other European healthcare systems are more moving towards more use of market forces and more consumer choice, not less.

Our healthcare system is broken because consumers have too little power to spend their own money effectively. Taking what little power they have now away from them is a recipe for disaster.



Project FDA.
  
home   spotlight   commentary   research   events   news   about   contact   links   archives
Copyright Manhattan Institute for Policy Research
52 Vanderbilt Avenue
New York, NY 10017
(212) 599-7000
mpt@manhattan-institute.org