Interesting comparison for Social Security

[Scooter]

If other insurers do not use the fact that Medicare is paying less to negotiate lower rates for themselves, then whose fault is that?

To use an example from home, for years the province of Saskatchewan, even though being one of the smaller provinces (accounting for only about 3% of the Canadian population), had the lowest per unit drug costs of any of the provincial drug plans. Why? Because they would not agree to list a drug on their formulary unless they were getting it for the lowest of any price charged in Canada. The drug companies fell into line and never refused to make a deal on any drug on that basis, because they preferred to make slightly less profit than no profit at all. There is no reason why private insurers in the U.S. could not insist on the same deal, especially if they stick together. For far too long the providers/suppliers of health products and services have been the tail wagging the dog.

And then there is the fact that when administrative fees are based on a percentage of health care costs incurred by members of the plan, the insurer has absolutely no incentive to seek out the best price.

Of course, a universal single payer would change all that, but in the absence of sufficient collective wisdom to pursue that option...

[Long Run]

Maybe it will work better with medicines than providers*. A drug company will likely sell most drugs at whatever price they can get someone to buy; however, basic economic principles predict that a general price reduction will impact company decisions on whether to invest in this or that new drug development and ultimately fewer new drugs will be developed. And certainly, in the Canadian market, which is about 1/10 of the U.S. market, there can be certain policies implemented that work there because a different set of principles are at work in the U.S. market. If U.S. consumers pay higher prices and essentially ensure good profits, it is not skin off a drug company's bottom line to stamp out more pills at virtually no cost and sell them for cheap in Canada or elsewhere.

Of course, if Medicare and Medicaid follow the same strategy as the Canadian provinces, then this will cause drug companies to try to get more from private plans. If, private plans then point to the rates paid by Medicare and Medicaid as the new UCR, it will be interesting to see how drug companies respond. Only two options there -- limit R&D for new drugs (reducing expenditures for things like marketing will save money but are really just a one time reduction in the relentless increase in costs of developing a new drug), or turn around and charge more to Medicare and Medicaid (and Canada and elsewhere).

*When providers are paid less by Medicare and Medicaid, doctors and other providers have shown they restrict the number of Medicare and Medicaid patients they see, thereby making care harder to get and reducing the quality of care available. Not clear that drug companies would do the same.

[Scooter]

Ah yes, the old canard that reining in drug costs will decimate R&D.

Only one problem with that scenario. Jurisdictions which have implemented actual price regulation, not simply negotiating price, have not seen any drop in the level of R&D.

Plus, the old saw about U.S. consumers being gouged so foreigners can enjoy lower drug prices is getting equally old. If you want lower drug prices, do something about it.

[rubato]

Something that should be done, since the regulation of drug prices will never happen, is to give Medicare the power to negotiate the price it will pay for drugs, a power that was withheld from it when Part D was enacted as a payoff to the pharma lobby. Since Medicare is the country's largest customer, this would have the added benefit of moderating drug prices for everyone else even in the absence of price regulation.

It would be nice if Medicare, when it sets a lower rate of payment, could help set the usual and customary charge for drugs and other services. Instead it appears that it in fact increases that par rate because everyone else has to pay more. According to the healthcare consultants I interact with, when Medicare drops reimbursement rates to providers, those providers increase their fees to private plans, and this has been a big part of the medical rate increases for employers over the last few years. On vivid example is with respect to dialysis; Medicare negotiates the price of dialysis at about 15% of what private plans pay (a person under a private plan might pay $10,000 per month, but when the patient moves to Medicare after the waiting period, the amount paid to the dialysis provider is dropped to about $1,500 per month).

So you're saying that Medicare is better at negotiating prices than all of the for-profit plans?

Further proof that we need to throw out the private-insurance model, it just jacks up prices.

yrs,
rubato

[rubato]

"...

Of course, if Medicare and Medicaid follow the same strategy as the Canadian provinces, then this will cause drug companies to try to get more from private plans. ... "

Again you are saying that the supposedly efficient private for-profit system is inherently feeble and incompetent vs the muscular and virile Medicare negotiators.

You're right, and we know that's true because we pay 2x as much for really crappy care.

Throw the system out. Its broken. Only a goddamn fool would defend the US system.


yrs,
rubato