Centerfield

I very much agree. The attacks on the drug companies are mostly cheap shots. You can't get somethng for nothing, and you can't extend lives without paying substantially for it.

Let's face it. Extending the lives of old people is not economically efficient, because it costs a lot of money for medical services, and the elderly, for the most part, no longer work. But we all favor it fundamentally, because we hope to live to a ripe old age ourselves.

"I actually like the Medicare bill. Of course, I didn't actually read the bill - it's quite possible that the details make the reality alot worse. But I approve of what the bill is trying to do."

I actually read it. It's larded with more pork than a Memphis barbecue. There's $101 billion off the top in subsidies for big business and insurance companies alone. Hey, I approve of what the bill is purportedly trying to do--lower drug costs for seniors, something many seniors were already accomplishing, thanks to foreign phramacies. But for that matter, I also approve of what one of the local policeman was trying to do when he beat the armed robber half to death--he was trying to lower the crime rate. But that doesn't mean I approve of the way they went about it! The same benefits, without the pork, would have cost about half what the bill in fact dishes out. Controlling costs in even a moderate fashion, using the government's oligopsony powers in the same way that even modest insurance plans do, would have helped even more. But that would have hurt drug company profits...so instead, the taxpayers will subsidize the oligopoly profits of the drug industry, without any check on that oligopoly.

"It substantially reduces drug liability for poor and lower-middle-class Medicare recipients. "

It substantially reduces direct out-of-pocket drug costs for ALL Medicare recipients, whether they're poor or rich. At the same time it substantially increases Medicare-directed taxes for ALL Americans, rich and poor, including the uninsured. In fact, it raises direct and indirect Medicare taxation share to the average household to nearly $4,000/yr. This at a time when 25% of all American households are uninsured or underinsured, the average health coverage for a family of four costs over $9,000/yr, and the average household income for that family is a hair over $40,000/yr.

So what we're supposed to celebrate here is the raising of taxes on many folks unable to afford adequate health insurance, or even any health insurance at all (and remember that the SS/Medicare tax is from dollar one, and not deductible) in order to pay for increased benefits for people who already have health coverage. Hit hardest, of course, will be the "working poor" who make too much to qualify for Medicaid but too little to afford their own policies.

"The attacks on the drug companies are mostly cheap shots."

Drug companies have the highest consistent profit margins of ANY industry. Their annual profits are many times their annual research budgets. In fact, their marketing budgets are higher than their research budgets. The average campaign donations from the drug industry to those who voted for the bill were around $25,000/yr. To those who voted against, about $8,000/yr. Welcome to the real Washington! If this bill were revenue-nuetral, the drug companies would've sat it out on the sidelines. If it would have hurt them in the slightest, they'd have fought it tooth and nail. Instead they lobbied hard for it.

Why? Because it will subsidize their profit margins to the tune of many, many billions in additional profits. The problem was high drug prices. No one in Washington much cared until Americans started bypassing the U.S. drug pricing structure to get their drugs cheaper. This hurt drug company profits, and led to such absurdities as drug companies saying that drugs re-imported from Canada weren't safe--a line which vanished when people started asking if the drug companies were selling inferior drugs to Canadians. The drug companies lit a fire under the Bush administration and their bought & paid buddies Congress, and voila! Massive taxpayer susbsidies for drug companies, insurance companies, and big business!

Please don't ask me to cry for the poor misunderstood abused drug companies. I've grew up in a medical family with three doctors, been a clinic manager, been in health care as a financial and managerial professional off and on for over twenty years, and drug companies are near the very bottom of my sympathy list. Michael Jackson is higher up that list than drug companies.

> Michael Jackson is higher up that list than drug companies.

!!!
But how do you REALLY feel?
Care to share a horror story or two?

Ron C noted:
> I think you meant to say "If you want an antidepressant that doesn't have really nasty side-effects, you can have the US taxpayer pay more for that.

Yes, of course. That's exactly what happens now. If we didn't have this nasty habit of investing in new drugs, drugs would be cheaper. And, of course Medicare and other state subsidies pay their due share of the fraction that goes to risk capital for new drugs.

> The US will hardly be a free market in the drug arena when prices will be subsidized by the taxpayer and medicare's inability to get bulk pricing.

That would only be true if we had single-payer.

Oligopolies and oligopsonies share many of the same properties and disadvantages (for consumers) of monopolies and monopsonies. You don't need single-payer to have monopsony effects, or single-supplier to have monopoly effects. We don't have a free market for drugs, we have a free market for some drugs, oligopolies for some drugs, and monopolies for some newer ones. There is no single "market supply structure" for all drugs in the U.S., or for that matter for medical care.

Depending on who you talk to and their politics, the biggest single problem with health care in this country is either [a] too much regulation, [b] too little regulation, [c] not enough competition, or [d] not enough government involvement. Or [e] none of the above, or [f] all of the above plus a bunch more....

I started a long article on health care for the local paper last year, then put it on hold when it became obvious that meeting length and "reader level" requirements at the same time was impossible. The system is so complicated that it would take a book, and not one written to eight-grade reading levels (the level of most newspapers). The subject of health care market structure and trends could easily fill a two-semester grad course in applied economics. I'd love to dig out some of that research and blog it here or over on my blog, and probably will. It's easy to paint black hats or white hats on your least or most favorite players, but the truth ain't so simple. While we all have our favorites, and the hats are mostly gray.

It's an apparent paradox of capitalism that some of the things that improve our lives the most come from the most heartless and greedy companies. While some folks look longingly at socialized single-payer health care as a solution to our problems, it has some major warts. And while some speak glowingly of our system of capitalist medicine, it too is clearly failing large numbers of our citizens.

No matter which way we go, the fact is there is now and always will be rationing of health care in America (and I include pharmaceuticals in that term--medical care increasingly means drug therapies). Under current trends, the cost of health care will continue to rise by double-digit annual factors, and we will have more and more uninsured and underinsured. Subsidizing the system as the Medicare bill does will not reduce demand, it will increase it, squeezing out more people at the bottom end of the money curve.

The battle is over how health care is to be rationed, what profits (and levels of profit) are acceptable or even required inefficiencies, and (as always) who pays the tab and how. The higher the profit margins of the sellers, the more likely they are to pee on us and spend megabucks convincing us it's life-giving rain. And of course us buyers want it all, and for free, and the very best there is, all for $3.95 and a store coupon.

A good short review of Medicare finances, the Medicare bill, and the problems we face in the future with the program can be found in an article here by REASON magazine's Jacob Sullum.