Medicare

I guess the Senate will be decided on who may have used a racial pejorative in school and the House will be decided on which party is demonstrably more suspicious of gays (with Nancy Pelosi's Democrats taking a commanding early lead).

If anybody's left who enjoys actual politics and policy, there's an interesting editorial in the WSJ today (Paid site, sorry!)

While they are not ready to recant in their opposition to the new Medicare drug plan, Gigot & Co. are pretty pleased with the way the market-driven elements of the plan have performed.

The early returns are encouraging, on both price and choice. Over the weekend insurers began marketing their 2007 Medicare drug plans, and all states except Hawaii and Alaska have more than 50 private options available -- up from an average of about 40 in 2006. Seventeen insurers are selling nationwide plans, up from nine this year. That compares with the one or two that critics of including private plans predicted would be available in many markets.

The average monthly premium that seniors pay is again $24, far lower than the $37 originally estimated by government actuaries. And while Democrats have hammered away at the idea that having seniors choose among competing drug plans is too "confusing," recent polls show satisfaction with the benefit in the 80% range.

I've mentioned before, my biggest problem with the plan is that, with no means testing, it is welfare for the masses, getting the government involved in everyone's plan. Yet it has been pretty mercilessly criticized by the Right. Ryan Sager considers it Exhibit A in an indictment of Bush's failures to promote conservative principles.

It is worth celebrating the market forces that were included in this plan's structure. And it is worth remembering what the plan would look like if the other guys drew it:

All of this would also seem to rebut the current Democratic campaign theme that having drug prices "negotiated" -- i.e., dictated -- by government is an urgent priority. Democrats point to the drug coverage provided by the Veteran's Administration as a model. But the VA usually keeps costs down by refusing to pay for newer, more effective medicines. The VA drug formulary includes only 19% of the medicines approved by the FDA since 2000.

One of our fears about the drug program is that it will devolve into price controls, thus destroying incentives for research and development as European governments have done. It would be a cruel irony if the Medicare drug benefit were to have the effect of delaying the cure for, say, Alzheimer's. Yet this is where Democrats seem to want to go..

Lastly, Vive la Difference!

Mark McClellan, the Bush appointee who has done so well in supervising the Medicare drug launch, is about to step down, so the choice of his successor will be crucial to keeping this market momentum. All the more so if Democrats take the House or Senate, where Henry Waxman, Pete Stark and others wait to do whatever it takes to show that the free market can't work in health care.

We'd have thought Republicans would be trumpeting the success of market competition in producing more choices and lower prices in Medicare, but instead most of them are merely advertising the new entitlement. Even they seem not to understand the stakes in making competition in Medicare work.

Pharmaceuticals Posted by John Kranz at October 4, 2006 4:46 PM