Tag: price controls

Conservatives for Higher Taxes

Center for a Free Economy president Ryan Ellis writes in the Washington Examiner that President Trump “has caved to the socialists” by proposing to set the prices that Medicare pays for certain drugs at a percentage of the prices that foreign governments set for those drugs:

Unfortunately, rather than fighting the socialists, the president has decided to become one with them — at least when it comes to prescription drugs. After spending most of this year rightly condemning governments in Europe and elsewhere for ripping off Americans by imposing below-market price controls on drugs, Trump and [Secretary of Health and Human Services Alex] Azar basically surrendered to the price controls and announced we would be adopting them ourselves…

By letting the foreign price controls serve as a reference price control here, Trump has put us down the same path of scarcity and rationing all too often seen in the rest of the developed world.

The purpose of Trump’s proposal is indeed to reduce the prices Medicare pays for these drugs. Medicare currently pays much more for these drugs than government-run health systems in other nations.

Beyond that, Ellis’s oped crystallizes everything conservatives get wrong about drug pricing and Medicare purchasing in general. A few clarifications:

  1. No one knows what the “right” price is for any drug. We need market prices because they create incentives that naturally and always push prices in the right direction. 
  2. Medicare’s administered (read: ouiji-board) prices are indeed price controls, but not in the usual meaning of the term. They do not restrain prices anywhere but within the Medicare program.
  3. Medicare’s administered/controlled prices are not market prices, any more than other governments’ administered/controlled prices are market prices. 
  4. The Trump proposal would merely change the way Medicare comes up with the prices it pays for drugs. Those prices would not be any more “price-controlled” after the Trump proposal than they were before. They would just be lower–if the proposal achieves its stated goal, that is, which may or may not happen (more below).
  5. Conservatives who argue Medicare should not pay less than it currently does for drugs need to address the paradox inherent in their argument that, in order to restrain government and have a free economy, government must spend more. In order to fight socialism, taxes must be higher.
  6. One cannot import a price control. That’s not how they work. A government can either impose price controls on its own populace, or not. It cannot import the coercion another government exerts on its own citizens.

Ellis is correct when he writes, “Markets do a much better job reducing drug prices than government price controls do, and they do it while making prescription medicines widely available to patients, as opposed to rationed due to scarcity.” But the end result of these misunderstandings and misconceptions is that conservatives end up crowding out markets and/by opposing efforts to reduce government spending. This is why the Left believes, with justification, that when it comes to health care conservatives are just a bunch of cronyists.

Another irony: the more likely impact of Trump’s reference-pricing scheme is that prices in other nations would rise, which is exactly what Ellis says he wants.

Overcharged by Cato adjunct scholars Charlie Silver and David Hyman is the antidote to this strand of un-conservative conservative thinking. 

Health Policy Topics in New, Online Version of The Encyclopedia of Libertarianism

The Cato Institute’s Libertarianism.org web site has released a new, online version of The Encyclopedia of Libertarianism.

The Encyclopedia offers “a general guide to the social and political philosophy that today goes by the name of libertarianism,” including several chapters of interest to health policy scholars:

Are ObamaCare’s Community-Rating Regulations a System of Price Controls?

ObamaCare’s community-rating regulations generally bar insurance companies from using any factor other than age to determine premiums, and prevent insurers from charging 64-year-olds more than three times what they charge 18-year-olds. I have long maintained community rating is nothing more than a system of government price controls, and should meet with the usual scorn economists universally heap on such boneheaded policies.

An esteemed colleague challenges my claim that ObamaCare’s community-rating is a system of price controls, because “the government doesn’t set a price.” Here is how I responded:

Price controls don’t always take the form of a fixed integer. Sometimes government sets prices using ratios.

Premium caps control prices by limiting this year’s premium to a ratio of last year’s premium. Medicaid’s prescription-drug price controls set prices as a ratio of the average wholesale price. Medicare’s price controls involve all sorts of complex ratios.

ObamaCare’s community-rating regulations control prices by (a) setting the ratio of premiums for healthy vs. sick people within each age category to 1:1, and (b) setting the ratio of premiums for young vs. old to 1:3. Insurers would not voluntarily follow those ratios, with good reason. But community rating forces insurers to set prices according to those ratios. Thus it is a price-control scheme.

WSJ: How ObamaCare Punishes the Sick

In today’s Wall Street Journal, I discuss new economic research showing ObamaCare is making health insurance worse for patients with high-cost medical conditions.

Republicans are nervous about repealing ObamaCare’s supposed ban on discrimination against patients with pre-existing conditions. But a new study by Harvard and the University of Texas-Austin finds those rules penalize high-quality coverage for the sick, reward insurers who slash coverage for the sick, and leave patients unable to obtain adequate insurance…

If anything, Republicans should fear not repealing ObamaCare’s pre-existing-conditions rules. The Congressional Budget Office predicts a partial repeal would wipe out the individual market and cause nine million to lose coverage unnecessarily. And contrary to conventional wisdom, the consequences of those rules are wildly unpopular. In a new Cato Institute/YouGov poll, 63% of respondents initially supported ObamaCare’s pre-existing-condition rules. That dropped to 31%—with 60% opposition—when they were told of the impact on quality.

Republicans can’t keep their promise to repeal ObamaCare and improve access for the sick without repealing the ACA’s penalties on high-quality coverage.

The lesson is clear. To repeal ObamaCare, opponents need to talk to voters about how the law is reducing the quality of health insurance and medical care for the sick.

Read the whole thing.

Obamacare Increases Man’s Premiums 300%, Supporters Call It a Success Story

Obamacare’s health insurance Exchanges opened for business, in most states, sort of, on Tuesday. Millions of people have reportedly flooded the Exchanges, but have had so much difficulty using the web sites that reporters have had a hard time finding anyone who has successfully enrolled in an Obamacare plan. The Washington Post’s Sarah Kliff writes:

Just moments after writing a blog post Thursday morning, about the lack of information on Obamacare enrollees, Enroll America reached out with contact information for Chad Henderson, a 21-year-old in Georgia who had successfully enrolled in coverage on the federal marketplace.

Chad is evidently a scarce commodity.

It was a little difficult to reach Henderson, mostly because so many other reporters wanted to talk to him. “I’m supposed to talk to the Chattanooga Times Free Press in a half hour,” Henderson said. “And The Wall Street Journal is supposed to call.”

Luckily, Henderson managed to squeeze me in for a few minutes.

Kliff reports that after a three-hour ordeal, Chad bought an Obamacare plan that cost him $175 per month – pretty steep, considering he makes less than $11,500 per year. His Obamacare premium comes to least 18 percent of his income. And no, Chad is not eligible for subsidies.

Compare that to what Chad could have paid if he bought one of the pre-Obamacare plans still available on eHealthInsurance.com until December 31. The cheapest such plan for someone meeting Chad’s profile is just $44.72 – as little as 5 percent of his annual income and about one-quarter of his Obamacare premium.

I can’t yet say whether Chad’s $175 premium is the lowest-cost plan available to him through the Exchange. (I’m in the process of researching that. Let’s just say it’ll probably take a few hours.) But it’s probably close. The cheapest plan available to him through eHealthInsurance.com after Obamacare’s community-rating price controls take effect in 2014, and drive up premiums for young, healthy people market-wide, is $190.23. That’s with the maximum cost-sharing allowed under Obamacare. So it appears Obamacare quadrupled Chad’s premiums, and Enroll America thinks that is a success story.

To me, the most interesting part is that Chad didn’t buy health insurance when it was available to him for just $45 per month, but did buy it at an unsubsidized $175/month premium. Why? Again, Kliff:

He describes himself as a supporter of President Obama who has anxiously awaited Obamacare’s rollout…

Part of his decision was ideological: He wants the health-care law to succeed.

Obama to Control the Price of Ivy?

Superabundant federal student aid has done a huge amount to get us into our bankrupting college mess. To get us out, today President Obama will propose, essentially, “soft” price controls. But they will likely leave the root problem intact while, if anything, adding new kinds of woe.

On his college bus tour, President Obama will propose that Washington start publishing ratings of schools based on such measures as average tuition, graduation rates, debt and earnings of graduates, and the percentage of a college’s students who are low-income. The ratings would also “compare colleges with similar missions.” Ultimately, the president will propose that the availability of aid be partly conditioned on the new ratings.

Let’s be clear: The price of college is almost certainly far higher than it should be, fueled largely by federal aid that essentially tells colleges “charge whatever you want – we’ll give students the money.” That’s a major reason that average, inflation-adjusted prices have more than doubled in the last 30 years. And it is good that the president, and many others, are essentially acknowledging the inflationary reality of aid. But will price controls help or hurt?

The New Republic: Obama Kinda Lied a Little about Obamacare

On Monday, The New Republic’s Jonathan Cohn admitted that President Obama “made a misleading statement about Obamacare rates” during his press conference on Friday. The magazine’s Twitter feed (@tnr) announced:

Whoops! The president (accidentally, we think) told a little #Obamacare lie on Friday.

During his press conference, the president said:

[When it comes to people without access to employer-sponsored coverage,] they’re going to be able to go on a website or call up a call center and sign up for affordable quality health insurance at a significantly cheaper rate than what they can get right now on the individual market. And if even with lower premiums they still can’t afford it, we’re going to be able to provide them with a tax credit to help them buy it. [Emphasis added.]

The problem, Cohn writes, is that:

while some people will pay less than they pay today, some will pay more. They will primarily be young, healthy men who benefited from preferential pricing in the past, were content with coverage that had huge gaps, and are too wealthy to qualify for the law’s tax credits—which are substantial but phase out at higher incomes…

But somebody listening to Obama’s press conference probably wouldn’t grasp that distinction. They’d come away thinking their insurance will be cheaper next year. For some, it won’t be. Obama isn’t doing himself, or the law, any favors by fostering a false expectation.

Pages