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Medicare Part D – Breaking the System June 21, 2006

Posted by federalist in Government Spending, Healthcare, Regulation.

Today’s Wall Street Journal features a sob story about how Medicare Part D is driving pharmacies out of business.  It seems that this newest government entitlement is paying pharmacists less while driving up their administrative costs.  So this is as good a time as any to ask: Why?

Why is the government in the business of reimbursing prescription drugs to begin with?  Unfortunately, our government has gotten into the business of healthcare, and drugs are an integral part of healthcare.  But government has gotten into the healthcare business in a very strange way.  Instead of just saying, “Fine, we’re going to pay for the following services for all citizens,” it decided that it would cover different citizens differentially, depending on their incomeand age.  And because that wasn’t complicated enough, it decided that instead of just buying and administering the healthcare directly it would establish a massive bureaucracy to buy the services through the free market … at rates set by the government.  So if you have a medical need for, say, Diovan, the government might help you out.  It might pay all or part of the cost of seeing a doctor to verify your need for the drug.  And then it might pay all or part of the cost of buying that drug.  There’s a big bureaucracy to intervene at every step and determine if and how the government will pay.

But let’s say you don’t want any part of that mess.  You earn your own money and you’re willing to buy your own drugs.  Why can’t you just go out and buy Diovan?  Unfortunately, again, the answer is government regulation.  The government has decided that a large class of drugs can only be sold by registered pharmacists.  And what does a pharmacist do?  In the old days, when most medications were customized, you actually needed a pharmacist to measure and “compound” raw ingredients as specified by a doctor.  These days pharmacists mostly just count pills and bill either private insurers or the government.

Why can’t we just sell medicine at any store, perhaps keeping them “behind the counter,” like cigarettes?  Manufacturers could prepackage them in common quantities and doses, and charge whatever they want.  If insurance wants to cover the costs, they can reimburse them (and require a doctor’s order to confirm a valid medical need).  And if an adult wants to dose himself up with dangerous and expensive drugs, without consulting a doctor, well, he can already ruin his health with tobacco, alcohol, caffeine, and numerous over-the-counter drugs.

The pharmaceuticals system is just waiting to be broken.



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