A Real Analysis of Medicare Policy

If you cruise the blogs on health policy with any regularity, you will no doubt see a lot of knee-jerk commentary on one side of the aisle or the other regarding reform of Medicare Part D and the role of government negotiation.  Generally, these appear to be written by self-proclaimed experts who often sound more like yappying toy lap dogs rather than health policy specialists.

But, if you are interested in a real, thoughtful and informed analysis of the subject, then I suggest you turn to the Piper Report posting on "Should Federal Government Negotiate Prescription Drug Prices in Medicare:  Emotions versus Economics; Politics versus Facts".  Unlike other bloggers on this topic, Kip Piper is a leading authority on Medicare and Medicaid.  Check him out. 

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2 Responses to A Real Analysis of Medicare Policy

  1. Peter says:

    But isn’t Piper’s argument logically inconsistent? First, he says “federal price negotiations [would] save little or nothing compared to the increasingly competitive private marketplace.” Then, he says “mandated negotiations would dramatically reduce the development of new, life-saving drugs.” Well, why? Or, rather, which is it? Seems to me he is throwing out any argument and seeing which one sticks.

  2. Kip Piper says:

    Hi. Thanks for visiting my blog. Good question, Peter. Let me see if this helps to explain my thinking.
    The first key point is that CBO (and others) have looked at the issue of federal negotiation of drug prices and determined that it would likely save nothing (that is, nothing more than market competition already saves). CBO is key, of course, since they will make the official budget “score” on whether any legislation on this issue saves federal dollars. Since the political issue at debate is the MMA prohibition against federal interference, for CBO and others the question becomes what would happen if that prohibition were eliminated and replaced with, say, a mandate that CMS negotiate prices nationwide under Part D. So if you look just at what members of Congress are debating, the answer is clear: changing the specific law would save nothing.
    The second point is that some believe that negotiations could theoretically save money but only if access to drugs (existing and new drugs) were severely restricted. That is, federal-run negotiations by itself save nothing more than what market players (in this case, the commercial drug plans) now save via competition. Even then, as the cited studies show, the savings are illusionary – since access restrictions raise costs in many other ways.
    I hope this helps.
    Kip Piper
    http://www.piperreport.com