House Speaker Nancy Pelosi is considering a monumental change to Medicare — and believes that President Donald Trump might support her plan.
Her big idea? Binding arbitration — a method that empowers government-appointed “arbitrators” to dictate the price of new medications and treatments. She hopes it’ll lower drug spending.
That would represent an enormous change from the status quo. Right now, drug makers negotiate directly with private insurers and healthcare providers.
Arbitration is just a fig leaf for government price controls. Arbitrators are supposed to be unbiased. But they’d likely always side with the government officials who appointed them — and set prices well below fair-market value. Like all price controls, arbitration would discourage medical innovation.
Under Medicare, drug coverage is broken into two parts. Medicare Part B covers potent medicines, like chemo- and immunotherapies, that physicians administer in hospitals and doctor’s offices. Medicare Part D covers prescription drugs that patients can pick up at the pharmacy.
For both programs, drug prices are determined through negotiations between drug makers and private payers, like hospitals or insurers.
In a binding arbitration system, if Medicare officials aren’t satisfied with those negotiated prices, they could appoint an arbitrator to do their bidding. Medicare officials would explain to arbitrators why they feel a lower price is justified. Pharmaceutical companies would justify their own suggested price.
Arbitrators would then choose a legally binding price. And their decision wouldn’t be limited to the two proposals on offer.
This type of dispute resolution is also called “baseball arbitration.” Baseball teams are well known for bringing in neutral arbitrators to resolve contract disputes. But Pelosi’s arbitration plan shouldn’t be compared to the big leagues, as the government would run the entire show. Government officials would get to pick the arbitrators — and would almost certainly choose ideologues who agree with them. So the “negotiation” would function identically to price controls.
Price controls always stifle innovation and harm patients in the long run.
Drug development is a risky business. It takes about $2.6 billion and between 10 and 12 years, on average, to create just one new drug. Around 90 percent of medicines never make it past clinical trials.
Investors are willing to take such financial risks on the off chance their drug succeeds and is profitable. Price controls eliminate that potential by making it harder for companies to recoup their R&D expenses. No investor would risk her capital knowing the government could undervalue her discoveries.
Just look at what price controls did to Europe. In the 1970s, European companies made more than half of the world’s new drugs. Then governments across Europe began to implement various price control schemes over the next 10 years. European countries develop less than 33 percent of new drugs today.
The United States, on the other hand, is the global leader in drug development — and has done so for over three decades. Because our healthcare system values drugs fairly, drug innovators are eager to research and develop drugs stateside. In fact, America’s biopharmaceutical industry dedicated close to $90 billion in R&D efforts in 2016.
All that investment has paid off, too. In the United States, researchers are developing roughly 4,000 new medicines targeting a range of diseases — including potential cures to Alzheimer’s, cancer, and diabetes.
If binding arbitration takes off, Americans may never benefit from these potential treatments. Instead, patients would be left at the mercy of diseases for which there are currently no cures.
Binding arbitration doesn’t deserve President Trump’s support — or the support of Democrats. Letting the government set drug prices would hinder future medical advances.
By Wesley J. Smith • National Review
bamacare failed. There is no denying it anymore. The supposed “signature achievement” of the 44th president isn’t just opposed by Republicans. The Affordable Care Act has now been jilted also by many Democrats, who, like so modern-day Lotharios, have abandoned their once-burning ardor for state insurance exchanges to pursue “single-payer” health care.
Some readers are yelling, “That was the plan all along!” Yes, but the stew is not fully cooked. I doubt President Obama and the Pelosi Congress of 2009 and 2010 planned for their party to move so radically this soon. Oh well. With burning hatred for everything Trump as the accelerant — and with polling popularity of Bernie Sanders’s “Medicare-for-all” legislation of last year serving as a justification — much of the Democratic party now unapologetically embraces outright socialized medicine.
The newly filed 120-page “Medicare for All Act of 2019,” authored by Pramila Jayapal (D, Wash.), already has 106 co-sponsors — nearly half of the Democratic caucus — and it seeks to yank America hard toward the port side of the political spectrum. The bill — which resembles Medicaid more than it does Medicare — would transform our entire health-care system into an iron-fisted centralized technocracy, with government bureaucrats and bioethicists controlling virtually every aspect of American health care from the delivery of medical treatment, to the payment of doctors, to even, perhaps, the building of hospitals. It would obliterate the health-insurance industry and legalize government seizure of pharmaceutical manufacturers’ patents if they refuse to yield to government drug-price controls.
Here are some of the plan’s most destructive features:
It Would Drown the Country in Red Ink: True to its title, the bill promises comprehensive and encompassing “free” health care for everyone, including primary care, hospital and outpatient services, dental coverage, vision, audiology, women’s reproductive health services, long-term care, prescription drugs, mental-health and substance-abuse treatment, laboratory and diagnostic services, ambulatory services, the list goes on and on. Last year’s version of the plan authored by Bernie Sanders (I., Vt.) — which didn’t include coverage for dental and long-term care — was estimated to add $32 trillion to the budget over ten years. It is also not irrelevant that the current Medicare — which is far more limited — is scheduled to go broke in 2028.
Yes, There Would be Rationing: The bill creates a Physician Practice Review Board “to assure quality, cost effectiveness, and fair reimbursements for physician-delivered items and services.” The term “cost-effectiveness” is code for rationing, which the law acknowledges by prohibiting the use of assessment methods of determining “any value or cost-effectiveness that discriminate against people with disabilities.”
Private Payment for Covered Health Services Would Effectively Be Banned: The bill requires that all covered medical services be provided without any out-of-pocket cost to patients. The only fee to which a doctor, hospital, or other service provider would be entitled would be that paid by the government. Kiss the health-insurance industry goodbye.
Doctors and Hospitals Would Become Government Contractors: The state would not, strictly speaking, employ doctors directly. But doctors would be coerced into becoming government contractors by the requirement that they sign a “participation agreement” to be eligible to receive payments from the government. The participation agreement forces medical professionals and institutions to:
Doctors who object to the provisions of a participation agreement would have little choice if they wanted to continue their careers, since they could be compensated for services only if they were deemed “qualified providers,” a status restricted to those who sign the agreement. (This is known in law as a “contract of adhesion,” meaning providers have no bargaining power or ability to negotiate terms.) If an individual provider’s agreement were revoked, he or she would be ineligible to be hired by a hospital or medical group, because their participation agreements require that they not employ any provider whose participation plan was “terminated for cause.”
Private-Pay Health Care Would Be Destroyed: What about doctors who wish to operate concierge practices, that is, accept cash directly from patients? Outside of the few non-covered fields such as cosmetic surgery, good luck! The doctor cannot have signed a participation agreement, since qualified providers “may not bill or enter into any private contract with any individual eligible for benefits under the Act for any item or service that is a benefit under this Act.” That means the doctor’s entire practice would have to be made up of people who opted not to be covered by the government, a very small pool of patients — the few very wealthy who could afford to foot their entire medical expenses out of their own pockets, and I suppose, “medical tourists” who travel to the U.S. for the purpose of obtaining treatment.
The Bill Seeks to Remove Profit in the Health-Care Sector: True to its socialist roots, the would eliminate profit in health care. Indeed, the bill states quite explicitly:
It is the sense of Congress that tens of millions of people in the United States do not receive healthcare services while billions of dollars that could be spent on providing health care are diverted to profit. There is a moral imperative to correct the massive deficiencies in our current health system and to eliminate profit from the provision of health care.
To enforce the “sense of Congress,” the bill forbids bureaucrats who determine the medical fees that will be paid to providers — which includes institutions as well as doctors and group practices — from taking into account the costs of “marketing” the “profit or net revenue of the provider, or increasing the profit or net revenue of the provider” or “incentive payments, bonuses, or other compensation based on patient utilization of items and services, or any financial measure applied with respect to the provider.” You think doctors have trouble receiving adequate compensation from Medicare and Medicaid now? Just you wait!
The Government Could Steal Pharmaceutical Patents: The bill requires the government to negotiate the price of medicines with drug companies. The bargaining power in that negotiation would — as with participation agreements — be all with the government. If a company refused to agree to the government’s price, the bill states, “The Secretary shall authorize the use of any patent,” by another company “for purposes of manufacturing such drug for sale under Medicare for All Program,” with compensation paid to the patent-owning company in an amount determined by the bureaucracy. How willing would pharmaceutical executives be to green-light the billions in investments required to develop new medicines knowing that the government could simply seize their patent and license another company to manufacture the drugs if they refused to sell it at a price the government demands?
Illegal Aliens Would Receive Free Health Care. Eligibility to receive benefits is not limited to citizens and aliens here legally. Rather, the bill reads: “Every individual who is a resident of the United States is entitled to benefits for health care services under this Act.” Illegal aliens living here are residents. Talk about a migration magnet. The only limitation on coverage for aliens is a provision that forbids eligibility to anyone traveling here “for the sole purpose of obtaining health care items and services provided under the program.” That’s much less than meets the eye. If an illegal alien traveled here to work, to escape violence, or to be with family, the exclusion clause would not apply. Further demonstrating the intent to cover those here illegally, enrollment in the program would be automatic “at the time of birth in the United States (or upon establishment of residence in the United States).” Residency could conceivably be established by a state driver’s license — now widely allowed illegal aliens — or even a utility bill. And get this: Unlike today’s Medicare identifier, the new Medicare Card would specifically not include a Social Security number, which many illegal aliens don’t possess.
Women Would Receive Free Abortion: Currently, the “Hyde Amendment” prohibits federal funding of abortion. That rare bit of culture-wars comity would be destroyed by the bill, which provides: “Any other provision of law in effect on the date of enactment of this Act restricting the use of Federal funds [i.e., Hyde] for any reproductive health service shall not apply to monies in the Trust Fund [the government entity that would be established to pay health-care costs].”
The Medicare for All Act of 2019 won’t become law while there is a Republican Senate and president. But the 107 co-sponsors in the House have put the country on notice. If the Democrats take over the government in 2021 as they — and some Never Trump Republicans — hope, by 2022, the United States health-care system will become a wholly controlled subsidiary of the United States government, bereft of liberty, increasingly sclerotic, managed by unelected bureaucrats churning out thousands of pages of onerous regulations, a centralized authoritarian mess from which the country’s health-care system would never recover.