The Financial Times
May 24 2003
America takes its dose of socialist healthcare
By Christopher Caldwell
…a bus trip into nearby Canada. The seniors load up on American-made prescription drugs that are, because of price caps, half as expensive north of the border…
Last week, the US Supreme Court delivered a blow on their behalf. The Pharmaceutical Research and Drug Manufacturers of America (PhRMA), an industry lobby, has spent two years trying to block the state from implementing Maine Rx, a new programme that pressures drug companies to sell to the state’s 325,000 uninsured at a cut rate. The court lifted an injunction PhRMA had won, and now the programme will proceed. More than symbolism is at stake. Twenty-eight states filed amicus curiae briefs on Maine’s behalf.
…the market irony that the working poor pay much more for their medications than anybody else. The middle class get private coverage through their jobs; the indigent get public coverage from the state.
A 1990 law says drug companies that sell to Medicaid must give states the same “best price” that would result from market competition between “health maintenance organisations” and other group insurers – a reduction of about 25 per cent. Maine thinks all its citizens should get this discount. So it is demanding “rebates” from the pharmaceutical companies that it will pass on to the uninsured.
Health creates funny economics in the best of circumstances. If the commodity is life, then the demand is infinite and the supply is 1. Unsurprisingly, then, the Bush administration has approached the problem with an ad hoc mix of policies. The Supreme Court case, in fact, could have been avoided had the administration simply declared whether it thought Maine Rx legal. But Bush dawdled, because he was trapped between his free-market base and an electorate that is increasingly interventionist on health questions.
Maine has tried to act like a big HMO, winning bulk-purchase rates for the last corner of American society that lacks them. The plan is very much in the US style of regulatory welfare. Through the tax code and the Federal Register, private interests are given “incentives” or “directives” that amount to offers one cannot refuse. Maine has ascertained that there is spare profit in drug companies that it would rather use for consumer purposes than for product development. So it is essentially shifting private sector money out of research and into welfare. Americans still do not realise that the prescription-drug controversy, like discussions of national health policy everywhere, is at root an argument over terms of rationing. One enthusiast even calls Maine Rx a “no-cost reform”. That’s wrong. It is a hocus-pocus way of levying a tax on business to fund social services – minus the democratic accountability of a welfare programme. The vast sums that are moved this way never get recorded in the budget ledger, permitting Americans to delude themselves that they are less socialist and more “independent” than their European cousins.
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Comment: This is yet more evidence that the free market in health care simply does not exist. Instead of beginning the reform debate with a discussion of free markets versus the government, we need to discuss the policies that will result in the best health care utilization of our resources. Once those are decided, then we can define the appropriate role of government in ensuring that those policies are carried out.
Actually, this homework has already been done. All studies confirm that a single, universal, publicly administered health insurance program, funded at our current level, would provide comprehensive health care services for everyone. Why do we continue to refuse to embrace this well documented fact?
Is it really better to limit the discussion to “lack of political traction” in our “free market” economy? People are dying while we dwell on this senseless debate.