Sliding the Slippery Slope to Socialized Medicine

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As a cost saving measure, New York State will only pay for drugs for Medicaid patients that are on a "preferred list" of medications. As Newsday reports:

The "preferred drug list" was adopted by lawmakers to curb the skyrocketing costs of prescription drugs. To get on the list, drug companies must pay the state large cash rebates. Medicaid will only cover drugs on the list.

However, when the legislation was adopted, it was agreed that state health bureaucrats would still agree to allow Medicaid reimbursement for drugs not on the list if physicians thought they were medically appropriate. Now, Republican Gov. George Pataki wants to make it harder for patients to get access to drugs that are not on the state's list. Medicaid has been screwing doctors for a long time by cutting reimbursement rates and the result is that more and more physicians are refusing to treat Medicaid patients. New York evidently now wants to expand this successful policy to pharmaceuticals.

Pataki's proposed tightening of the screws on drug reimbursement is an example of how the US will eventually slip into "universal" (and inferior) health care–one price control scheme at a time.

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  1. Why shouldn’t Medicaid be limited to generic drugs?

  2. Why shouldn’t Medicaid be limited to generic drugs?

    How does that proposal relate to the post?

  3. bubba: I’m for getting rid of Medicaid entirely. As MP noted, that’s not the point of my blog item. It’s an example of how creeping socialization of medical care proceeds.

  4. Is it hot in here? And are those bubbles I’m beginning to see? Oh well, I guess it’s not too bad…

  5. Re “To get on the list, drug companies must pay the state large cash rebates.”

    So what’s the problem? The drug corporations are free to enter into the contract or not.

  6. Yeah, it is terrible when a government uses the laws of supply and demand to set a price point. I like it better where the insurance companies play nice with the pharma people and then just invoice me and my employer. That’s so much less, oh, I don’t know, haggle-y.

  7. To be clear, I share some of the larger concerns, I just don’t see why this item merits particular attention.

  8. Are they, luisa? I would imagine that Medicaid is a large chunk of money for them.

    If they were to decline taking that free money, what is their alternative?

    If they were smart, they’d be clamouring for an actual free market as much as us looney libertarians, if they actually make a product people want/need.

  9. Can’t we just go back to the drug and healthcare system the way it was…before the Republicans “fixed” it?

  10. Right, because a government declaring a price is TOTALLY a market interaction.

    The point is, I think, that the Old Fart Interests will lobby until everything is covered, and then it will proceed to everyone from there.

  11. This is like arguing if people on food stamps have the right to buy filet mignon. It is the system of food stamps that is the problem.

    I am all for the incremental approach to freeing markets (and against its converse), but trading more government control for less tax money spent is, if not a good, at least a neutral exchange.

  12. Electricity: The drug companies will sell old drugs to New York State, Canada, Germany, Britain, and most other places so long as what they get is above the marginal cost of their production. As pharma economist once explained it to me–the price of the first pill of Lipitor (insert your favorite drug here) was $600 million. We can produce the next one for 10 cents. Who’s going to pay for that first pill?

  13. All: Realizing that drug companies are about as popular as oil companies, Walmart and tobacco companies, if you’re at all interested my views on the topic see my article Goddamn the Pusher Man.

    Of course if you do choose to read my article, you must keep firmly in mind that I do own minuscule amounts of drug and biomedical company stocks, though I would be happy to own lots of such stock if anyone wants to give it to me and I promise to fully disclose any such gifts.

  14. Oh all right, I’ll buy it, but for $600 million dollars, that pill better grant me immortality, too.

  15. trading more government control for less tax money spent

    What on earth makes you believe that, in the long run, we won’t have more government control and more tax money spent?

    This sounds like the old trading liberty for security trope – in the end you’ll have neither.

  16. Ron,

    The problem with getting rid of medicare entirely is that most private companies have dumped their retirees onto medicare. My father is retired from a large company. Once my mother reached eligibility for medicare, she had to be on medicare and the private insurance would only pick up the gaps. My mother had a year long and ultimately fatal battle with cancer. Had it not been for medicare, my father would be destitute, especially now thanks to the wonderful bankrupcy laws we now have. If you just get rid of medicare all together, people who are unfortunate enough to have a catastrophic illness will be left destitute. Few people can afford the costs associated with say cancer treatment. I find it difficult to beleive that the private insurers would pick up the costs paid for by medicare now. We do need some kind of catastrophic coverage. Medicare should not be paying for small things but I do not think that it is just or good for society for it to mean poverty for anyone who is old and gets a catastrophic illness.

  17. R C Dean

    I actually agree. Soon we will have neither freedom from control nor freedom from taxation. And, despite what the ‘Democracy is Freedom’ people say, nothing we say or do will change that.

    Ultimately taxation and legislation are two sides of the same beast. Both feedback on the other. Most government action unabashedly both taxes and controls. I was only commenting that at least in this situation the NY taxpayer may save some money (though they will probably just spend the $36 mil on something else).

  18. John,

    In essence what you are saying is a tautology: the existence of Medicare justifies itself by the dependency it creates. I will be willing to grant that those people who paid the tax their entire lives may be entitled to some compensation. Ultimately, however, enduring the pain of ending the program will help more than it hurts.

  19. Dammit, Bailey, how many times do I have to post this link before you get it through your thick skull.

    http://mattwelch.com/archives/week_2005_04_03.html#003088

  20. I remember one “A Modest Proposal” type piece suggesting that the best way to make perscription drugs widely available to everyone, and so cheap that even the most indigent members of society was for the governmnet just ban all of them. After all, look what the War on Drugs did for the availability and affordability of narcotics. ;>

  21. madpad,

    New York’s Medicaid prescription drug plan has nothing to do with the Bush’s Medicare prescription drug plan. Medicaid is the state-run supplement to the Federally run Medicare system.

  22. complex,

    It is not a tautology at all. The point is that people have come to rely on the program and private insurance has dumped people onto the program who are now too old to get anymore private insurance. Yes it is painful to keep medicare and in a perfect world the market would work better. My point was that the transition costs of getting rid of medicare would be higher than the benifit.

    “I will be willing to grant that those people who paid the tax their entire lives may be entitled to some compensation.”

    That is awefully charitable of you, considering the fact that it is their money they paid in. The problem is that there is no way to do that. People like my father are too old to get any insurer to cover them, so you can’t spread out the risk. Further, if you just give them a lump check, you could never give them a check large enough to cover the costs associated with a catastrophic illness. Again we are left with the fact that anyone who is unfortuneate enough to get a catastrophic illness dies in poverty.

  23. Right, because a government declaring a price is TOTALLY a market interaction.

    Compared to the way drug prices and availibity is currently set.

    I think it comes down to whether one believes that US health insurance companies are a good proxy for the demands of the consumers they represent.

  24. Medicaid is the state-run supplement to the Federally run Medicare system.

    Not really.

    Medicaid is for poor people no matter how old they are, and Medicare is for old people no matter how rich they are.

  25. The point is that people have come to rely on the program and private insurance has dumped people onto the program who are now too old to get anymore private insurance. . . . People like my father are too old to get any insurer to cover them, so you can’t spread out the risk.

    There’s a rather obvious answer lurking between the lines here, no?

  26. No Phil, the only obvious question I can see is how do you limit the transition costs of getting rid of medicare. Perhaps you could enlighten the rest us with your superior intellect.

  27. Medicare should not be paying for small things but I do not think that it is just or good for society for it to mean poverty for anyone who is old and gets a catastrophic illness.

    Others have pointed out philisophical issues with this, but some pragmatic ones surely exist as well. As soon as you cover catastorphic illnesses such as cancer, you can then begin to posit things such as, “Wouldn’t it be cheaper to buy preventative X instead of later medicine/proceedure Y?” And surely this is the case a lot of times that prevention is cheaper than the cure.

    From here of course the government can regulate behavior by taxing McD’s more than Whole Foods or only allow food stamps to buy “approved foods.”

    This BTW doesn’t mention the obvious amount of corruption a government run system of choosing “appropriate drugs” can become.

    FWIW – I don’t necessarily disagree that a saftey net may be preferrable to nothing, I’m just completely unsure how it would work in real life.

  28. Six,

    Good points. I think at some point you have to have some kind of safetynet, either through outright transfers or subsidized private insurance. We have a 13 trilion dollar economy, we ought to be able to find a way to help the truely needy. It is not like getting cancer or diabetes is due to misconduct or you are encouraging bad behavior by treating it. The answer is that you have to help but also keep the market system in tact to avoid the as much as the ineveitable government curruption and misallocation or resources that occur with a subsidy.

  29. “There’s a rather obvious answer lurking between the lines here, no?”

    No new enrollees?

  30. It only looks like a slippery slope from the side. Once you are on it, it’s more like an upright edge of a razor blade.

  31. To luisa: A single-buyer market failure is every bit as problematic as a single-seller market failure.

    When a single customer uses its market share to manipulate price, the result is sub-optimal.

  32. To John: No elderly person paid anywhere near enough into FICA to justify the benefits they are currently receiving. Your parents paid far less in tax than we do now. Each generation has been playing this ponzi-scheme, paying a little and making big promises to themselves. This worked as long as each generation of suckers was bigger than the last. This is no longer true.

    Hell, my grandma never paid a dime into FICA (and grandpa paid pennies), yet she has been living comfortably off his pension and SS for FORTY YEARS. This money does not grow on trees.

  33. Ok Chad,

    So I guess we should just say fuck them? I got a news flash for you Chad, the medical costs associated with a catastrophic illness is more than you or 99% of the people in this country will make in their entire lifetimes. I would be my mother’s medical bills were easily in the one to two million dollar range. A million dollars is 50K a year for 20 years or 33 years of the average salery of 33K. That is 100% of the income, not the FICA payments. The point is that you have to provide some way to spread the risk of catastophic illness through insurance and find a way for people to be able to afford the insurance.

  34. So I guess we should just say fuck them? I got a news flash for you Chad, the medical costs associated with a catastrophic illness is more than you or 99% of the people in this country will make in their entire lifetimes. I would be my mother’s medical bills were easily in the one to two million dollar range.

    You should be careful putting trust in the government to solve this problem though. Here is Canada, where health care is “universal”, there is no way they would have spent 2 million dollars treating your mother. I believe $100,000 is about the max that any treatment can cost under the system (I don’t know if $100,000 is the exact number, but it is closer to $100,000 than to a million), and even then, those treatments would be rationed and probably be given to someone younger where there was a greater chance for success. It would be illegal for your mother to purchase any type of insurance or pay her own money to cover treatment, so unless you mother could afford to go to the U.S., she would have no options. Most likely, in “compassionate” Canada, your mother would recieve morphine and a bed to lay in and that is that. Under socialized medicine, they are allowed to say “fuck them” in ways we could never imagine a private hospital or doctor of doing.

    In the long run, the only reason Medicare was paying for your mother’s treatment is because the government is spending loopy amounts of money. That is good while it lasts, but our current system is not sustainable (there are going to be more people getting 2 million dollar treatments soon than people paying 15% of thier paycheck into the system). And a “solution” to health care like in Canada isn’t a solution – Because people are dying from lack of medical care. Government health care does not mean that people get health care, it means that the government has a monopoly on health care. The health care system in Canada can do things that would get people thrown in jail in the U.S., because the government is never held to the same standards as private companies.

  35. Okay, John, you’ve convinced me. We should all be slaves so that old people can live six months longer than they would without taxpayer-funded health care.

  36. No, we shouldn’t “fuck” them, but we should force them (the boomers and their parents) to be part of the solution, given that they are most of the problem in the first place. Trying to dump the entire burden on Gen X and Gen Y is not the answer. In short, we have hit the end of the ponzi scheme and have to do something about it. This is going to require pain all around. The more generations we can spread it across the better.

    I am sorry about your mother, John, but I would much rather spend that money providing 50,000 Africans basic health care next year, presuming you are going to force us to donate it to health-related charities in the first place.

  37. What nobody has mentioned in this conversation is the fact that most of us with private health insurance are already limited as to what drugs our insurance will pay for. This is simply a case of Medicare copying the policies of Blue Cross, HAP, etc. Several times I’ve had doctors prescribe drugs only to have my insurance company reject his recommendation–and not just generic vs. proprietary either.
    While I agree with those who say there has to be a market solution, I don’t think restrictions on drugs is a sign of the apocalypse–it’s just part of pre-existing market solutions.

  38. The private healthcare system does NOTHING to add value to the system and cannibalizes America at it’s neediest. It is the prime reason pruductive employment in America has so drastically declined and why our trade deficit is so exorbinately high. We are the only Western power that leeches off our healthcare for profit. For that we are stupid and deserve the poor quality that we NOW get.

    JMJ

  39. Exactly, Jersey, and after we get rid of those leeching off our healthcare for profit we can go after those who profit by selling childrens’ shoes. I mean, childrens’ shoes, man, how could anyone be so heartless as to profit from selling childrens’ shoes? YOU BASTARDS!!

  40. Gosh, that mostly private healthcare system has made medical advances that boggle the mind. But that has had nothing to do with the incentives of large profits, I’m sure. Maybe we should freeze healthcare at 1900 levels and make sure that everyone gets that. Who needs all of that advanced equipment and medicine, anyway? It’s more important that everyone be equal. Did I say 1900? Maybe 1000 would be better.

    Oh, and if the trade deficit is such a problem and has any real economic meaning, why not stop trading with other countries at all? That would solve the “outsourcing” problem, too. And we’d probably have less reason to use our military overseas, as well.

  41. Oh, and if the trade deficit is such a problem and has any real economic meaning, why not stop trading with other countries at all? That would solve the “outsourcing” problem, too. And we’d probably have less reason to use our military overseas, as well.

    I know, let’s build a wall. It’ll need to be a really high wall, so it’ll need lots of American concrete and steel, and it will employ lots of American unionized workers.

    Isn’t that the solution? C’mon folks where’s your vision?

  42. For that we are stupid and deserve the poor quality that we NOW get.

    Actually, the U.S. has the best health care in the world. It is expensive, but it is better that countries with total socialized medicine (as opposed to the 60% socialized medicine the U.S. has).

  43. “Oh, and if the trade deficit is such a problem and has any real economic meaning, why not stop trading with other countries at all? That would solve the “outsourcing” problem, too. And we’d probably have less reason to use our military overseas, as well.

    I know, let’s build a wall. It’ll need to be a really high wall, so it’ll need lots of American concrete and steel, and it will employ lots of American unionized workers.

    Isn’t that the solution? C’mon folks where’s your vision?”

    I think you’re on to something here, although I don’t think the wall would have to be all that high. Once Americans stop trading with other countries our standard of living will plummet. We won’t need a wall to keep people out.

    Wait. Did you mean keep people out or keep people in?

  44. The wall can’t be made of steel, because the U.S. is just about out of the steel business. Maybe wood, which is, after all, a renewable resource, would be best.

  45. Pro Libertate, we also have to import a substantial amount of our Portland Cement from Mexico and Canada, so I guess we’ll have to forget about a concrete wall at all. We’re even importing gravel and crushed stone in some parts of the country. No rebar and no concrete. We still have lots of sand I think.

    And forget wood we have to import that from Canada and Brazil too. 🙂

  46. I guess we’re just screwed then. We’ll be overrun by the alien hordes in no time.

  47. Whoah….
    Define “best healthcare system in the World”, because I can go find numbers out there that show that the USA spends up to 13% of GDP for health and life expectancy metrics that are worse than many other countries.

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