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June 13, 2013

A Liberal Has an Innovative Idea: Price Controls on Medicare

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A liberal has a new and innovative idea: impose price controls on prescription drugs paid for by Medicare. Why don't our policymakers come up with this kind of innovative, out-of-the-box thinking? Of course, the truth is they have, many times, including in Medicare.

Both Medicare Part A (hospital costs) and Part B (physician costs) are price controlled by the federal government, and we see how well THAT has controlled Medicare spending.

It's true that brand name drug companies typically charge more for their products in the U.S. than most other countries. Without defending every price a drug company sets, there are solid principles behind what's known in economics as "differential pricing." But it's also true that Congress passed Medicare Part D in 2003, which set up a prescription drug program in Medicare, and it has worked remarkably well. It may be one of the only federal programs that actually cost less than anticipated.

But when the International Federation of Health Plans released its recent report comparing US hospital and drug charges with several countries, that got the price controllers buzzing. The US pays more for virtually all of the services and drugs listed in the report. Interestingly, the difference is much greater for most of the hospital procedures than for drugs. So why not call for price controls on hospital procedures? Oh, wait, I almost forgot: Medicare already imposed price controls on them.

There is an old saying that if it ain't broke, don't fix it. Medicare Part D isn't broken; it is working even better than predicted. Which may be why liberals will not rest until it finally is broken.

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