April 18, 2007

Hayek vs. Marx

The World's Greatest Deliberative Body will vote today on one of the worst of the six in '06 initiatives that the Democrats campaigned on: allowing the government to negotiate drug prices for Medicare Part D.

I was on board with the President when Part D was enacted. Many thoughtful libertarians and small government types decried it as a new entitlement. It's a valid point, but if the government is going to pay for heart surgery, it seems that buying a bottle of Plavix(r) might be cost-effective. I also appreciated that there were free market mechanisms built in.

The WSJ Ed Page point out that this part of the program has mitigated their opposition.

We opposed the prescription drug bill as a vast new entitlement, but there's no denying the program's innovation of using private-sector competition has worked far better than critics predicted. In the first year alone, the cost of Medicare Part D came in 30% below projections. The Congressional Budget Office calculates the 10-year cost of Medicare Part D will be a whopping $265 billion below original estimates.

Seniors are also saving money under this private competition model. Premiums for the drug benefit were expected to average $37 a month. Instead, premiums this year are averaging $22 a month -- a more than 40% saving. Democrats don't like to be reminded that many of them wanted to lock in premiums at $35 a month back in 2003. No wonder recent polls find that about 80% of seniors say they're satisfied with their new Medicare drug benefits.

Now, the Democrats are in charge and the one good part of the bill in danger. (To be fair, this vote alone is an "I told you so" against my initial support.) We can't let people choose and companies compete and innovate -- it would be better if the government did all that! Like they do for the Veteran's Health Administration.

That's a good comparison. The VHA offers only one in five of new drugs released since 2000. Of the 300 drugs most commonly prescribed for seniors. a study found that one in three -- including such popular medicines as Lipitor, Crestor, Nexium and Celebrex -- are not covered under VHA, while 94% are available under Part D. The best comparison between VHA and Part D?

Statistics released March 22 by the VHA and Department of Health and Human Services show that 1.16 million seniors who are already enrolled in the VHA drug program have nonetheless signed up for Medicare Part D. That's about one-third of the entire VHA case load. Why? Because these seniors have figured out that Medicare Part D offers more convenience, often lower prices, and better insurance coverage for their prescription drugs. In short, seniors are voting with their feet against the very price control system that Democratic leaders Harry Reid and Nancy Pelosi want to push them into.

Where the market works, government will work much better. Just like when the government does...uuh...

Pharmaceuticals Posted by John Kranz at April 18, 2007 10:31 AM