A Prescription for DisasterCommentary by Pete du Pont
August 23, 2000
After watching the Democrat's convention, it's apparent that they believe prescription drug coverage is their key to the house - the White House, the U. S. House, the 50 state Houses, etc., etc. That's why between now and election day it will be difficult to read any campaign related news and not see something about prescription drugs.
Nothing new here though, for many liberals have been singing this tune for years, and it's easy to see why. Prescription drugs are increasingly important to health care, as new drugs are the main reason medical science has made amazing progress in recent years against cancer and heart disease, for example. In fact, prescription medications are often the most effective and cost-efficient method of treatment.
While there's broad agreement over the value of drug coverage, there's a big disagreement over the best way to provide older people with access to it. About two-thirds of seniors currently have coverage for prescriptions. The rest do not, because Medicare is an outdated insurance program that leaves seniors exposed to many out-of-pocket costs, included drugs.
To solve this problem, national leaders on the left want to add a drug benefit to Medicare. The fact is that Medicare is already going broke faster than Social Security, so they only way to "pay for" the drug benefit is to control drug costs. So an essential component of the liberal plan is that the federal government would set the price companies are allowed to charge pharmacies, possibly at a 40 percent discount.
Meanwhile, over twenty states have become impatient and have begun instituting prescription drug laws of their own. Maine, for example, has called for state price controls that would apply to public consumer purchases.
While I am a supporter of giving power to local officials to make decisions, these states have chosen a prescription for disaster. Every past government effort to control costs through price controls have backfired, whether it be oil, rent, products, or services. This is especially true in health care. For example, Medicaid's effort in 1990 to require that they receive the lowest prices led to higher prices and smaller discounts in the private sector. And when government-run programs to buy drugs in bulk popped up in Canada, they drove private drug plans out of business leaving consumers at the mercy of government bureaucrats to determine what drugs they could have and when.
That is the effect of price controls: rationing of the controlled product to those who need it.
The only regulatory way to cut product costs significantly is to deny people - particularly the poor and elderly - the medicines they need to keep them healthy. That's how it's done in Europe and Canada. The British prescription drug plan refused to cover the cost of new anti-flu drugs, calling it a high-priced waste of money. Then the flu epidemic hit. Many seniors and asthmatics wound up in hospitals and died. The point is government, not individuals, decided what medicines would be available.
Thousands of Ontario seniors are being denied new treatments for osteoporosis, Alzheimer's and Parkinson's disease in the name of cost containment. The new therapies are among dozens that have been waiting for years to be added to the list that dictates which products the government will pay for.
Medicaid also uses limits on access as its primary cost controller. New Hampshire's Medicaid program limited access to new drugs along with price controls. They saved an average $57 per year on drugs for schizophrenia patients - but because the rationing drove people to mental institutions for help, it added $1,530 per year in costs for visits to mental health clinics and emergency rooms.
And that's the sad fact about these state plans - and the one the liberals are proposing: Price controls are essentially spending controls. An honest look at the statistics shows that its not skyrocketing prices that's creating the rise in drug costs, it's that an influx of new wonderful drugs has become the preferred method of treatment.
The truth is we can afford to cover the cost of new medications by employing a comprehensive approach to health care. Medicines free us from relying on more expensive and less effective kinds of care. We can pay for new drugs by capturing these savings and becoming more aggressive in replacing less effective and costly medical care that such innovations can and do displace.
That's what most private insurance does. Far from demonizing it, private insurance should be our model and our goal. The alternative is rationing access to new drugs and the benefits they bring, and that lessens the quality of life for the old and the ill.
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