Health reform plans represent financial malpractice

Detroit News, February 27, 2010

President Barack Obama has made it clear that reducing the cost of care is one of the primary goals of his reform effort, a point he emphasized at Thursday’s health care summit. And yet, according to a recent report from the Department of Health and Human Services, the cost of health care would grow more rapidly under the Democrats’ reform plan than it would if Congress did nothing.

In other words, the legislative package would put more strain on middle-class Americans’ finances during a period of historic economic uncertainty without addressing the major cost issues affecting our health sector.

Consider the reform package’s approach to Medicare, the government health-insurance plan for seniors. According to the HHS report, the Senate’s plan to wring $493 billion in savings from Medicare “may be unrealistic.” Department actuaries reached a similar conclusion after examining the House’s reform plan.

Meanwhile, the Congressional Budget Office has reported that the Senate bill would cause premiums for individual health insurance policies to rise by 10 to 13 percent by 2016. Employer-based premiums are likely to continue increasing at roughly the same rate with or without reform.

These findings shouldn’t be surprising. Just look at the House’s plan to reform Medicare Part D — the government-subsidized prescription-drug benefit for seniors.

Under the House measure, drug manufacturers would be required to offer special rebates to the federal government for drugs purchased for seniors who are eligible for both Medicare Part D and Medicaid, the government health-insurance plan for the poor. A similar provision was omitted from the Senate’s reform package, but several top House lawmakers, including Henry Waxman (D-Calif.), have vowed to fight for its inclusion in the final bill.

The proposal would save the government some money on prescription drugs in the short run. But it would inevitably result in both higher drug prices for the privately insured and fewer innovative new treatments.

In fact, the CBO has admitted that the provision “would reduce manufacturers’ incentives to invest in R&D (research and development) on products that would be expected to have significant Medicare sales.”

In other words, some in Congress would prefer to save pennies in the short term even if it stunts research into cures for debilitating conditions like Alzheimer’s, Parkinson’s and cancer.

And according to Yale University economist Fiona Scott Morton, these proposed rebates “would likely result in higher prices for consumers in the private sector.” In fact, the CBO predicts that this provision could raise Medicare drug premiums by as much as 20 percent.

Why? To give even steeper discounts to the federal government, drug makers will have to raise prices for everyone else.

In short, after months of exhaustive debating and deal-making, Congress has produced a legislative package that will both stunt research into new medical cures and make health care more expensive for most Americans. Can this really be considered comprehensive health care reform?

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

Subscribe to our newsletter:

This field is for validation purposes and should be left unchanged.
Scroll to Top