The unravelling of Medicare?  

I've been watching this Medicare bill come together, and I have a couple of basic criticisms. First of all, I'm not sure how the country is going to pay for it. The official pricetag is $400B over ten years, but even some Republicans think that estimate might be low. With 40M Americans on Medicare, it works out to $1,000 per patient, which doesn't sound like much when you consider that all 40M are either over 65 or disabled. I don't know if the estimate is based on current drug costs for seniors, but there's every reason to think drug use will rise dramatically under the plan, since the net price (for the consumer/patient) will go down. And of course, as the baby boomers retire over the next decade, more and more people will be on the plan, with fewer and fewer paying taxes. As one of those fewer and fewer, I'm concerned.

I'm also concerned about the design of the privatization experiment - Medicare will compete with private health plans in several metropolitan areas, and premiums will be adjusted based on how the costs line up the private plans. This seems at least reasonable, but then there's the provision that the government can't negotiate prices on drugs. From an efficiency standpoint, the government's biggest advantage in providing the benefit is scale, and yet this plan seeks to nullify that advantage. There are two likely motivations for this: lawmakers have an ideological agenda and want to fix the game so the government loses big; lawmakers are in the pocket of the pharmaceutical industry. But as a practical matter, the Canadian healthcare system uses price negotiation to great effect - to the point where some states want to use Canada as their main supplier.

One final observation - not really a criticism, since I know next to nothing about it - is that a governemnt sponsored drug benefit designed to work within the marketplace like this will create huge incentives for prescription drug use, as opposed to other forms of treatment. This may be a good thing - we've come up with some pretty spectacular drugs - but it will probably affect the health care industry in ways we can't see from here. Already the profession favors drugs over all other treatments, and the biggest investments and discoveries are made in pharmaceuticals. Subsidizing prescriptions through Medicare will only accelerate the process... whether that's a good or bad thing, I'm not entirely sure, but we should at least be aware of it.