Healthcare is big business. It has swelled to 16 percent of our Gross Domestic Product. The main cause of this swelling is the baby boom generation. About 10,000 folks per day are turning 60. That’s one every 9 seconds. The most senior in this group began enrolling in Medicare last year.
As the boomers age they require more health care products and services. This trend increases the demand for products (like drugs), and the demand for services such as emergency assistance, doctor and nurse services and testing laboratories, etc. We know that the price of every product (or service) in a free market responds to the supply of that product as well as the demand for that product. The increasing demand for health care from the baby boomers sends a signal to the free market: raise prices on high demand products and services. Unfortunately, these price increases affect everyone who purchases health care.
The Medicare Drug Benefit (Part D), signed into law by George Bush in 2003, has projected net federal expenditures of $727.3 billion between 2009 and 2018. It is difficult to believe, (in a capitalist country with growing health care costs), but this flawed law prohibits the federal government from negotiating quantity prices with the drug companies, as federal agencies do in other programs. How is this possible? Lobbyists.
Congressman Billy Tauzin, R-La., steered this bill through the House. Soon after, he retired and took a $2.5 million a year job as president of Pharmaceutical Researchers and Manufacturers of America (PhRMA), the main industry lobbying group. (One could say that Mr. Tauzin’s conflict of interest did not prevent him from performing his job.) Thanks to Billy’s hard work, we all now pay more for prescription drugs than we should. The 2010 Form 990 filed by PhRMA, as documented by Guidestar, shows total annual compensation to Mr. Tauzin totaled $11,578,956. Apparently he was wise to leave his old “job” as an elected “Representative.” Mr. Tauzin now is on the Board of Directors at Louisiana Healthcare Group. Does this guy know how to work the system, or what?!
Naturally, the increasing taxpayer subsidized demand for drugs sends a signal to the free market: raise prices on high demand drugs; and if necessary to maximize profits, restrict the supply of expensive drugs, then raise their price even more. The result is that Medicare Part D (via taxpayers), pays more for each enrollee’s drugs than they should pay, and the resulting price increases affect everyone who purchases prescription drugs.
In response to the higher prices for health care products and services, health insurance companies steadily increase premiums for everyone lucky enough to have health insurance. So average, middle class folks younger than 65, are paying ever increasing premiums for ever reduced coverage due to growing demand in the marketplace for all health care products and services.
One feature of the new Affordable Care Act (referred to by Rick Santorum as: O’Romneycare), is that at least the insurance companies must rebate excessive profits back to policy holders. But this is a “drop in the bucket.”
Congress must require that pharmaceutical companies engage in quantity price negotiations with Medicare, period. All suppliers must negotiate prices in the real world. Big pharma should not, does not deserve, nor does it need to receive favored treatment. Increased price competition between suppliers is necessary to lower prices for average consumers.
Congress needs to adjust legislation to protect average folks from the disease of ever growing health care costs. House Speaker Boehner’s idea of simply repealing the new, (constitutional) Affordable Care Act, does not qualify as leadership. Average Americans need help. We’re having trouble breathing ... every time we pay our health insurance premium!