Jewish World Review July 25, 2003 / 25, Tamuz, 5763
Killing the goose that laid the golden egg
When the Clinton administration attempted to move us down the road toward socialized medicine, Republicans responded that the answer to health-care problems was more choice and more market incentives, not state control. Democrats have never learned this lesson, and it appears that Republicans have now forgotten it.
Take the prescription drug benefit bills that recently passed the House and Senate. Reasonable people might be moved to pass a bill granting special drug benefits to the elderly poor or to those experiencing particularly crushing medical expenses. But that's not the way the politicians like to do things. Instead, all seniors -- rich and poor -- will be eligible for this subsidy.
The cost? A recent estimate put the price to taxpayers at $400 billion per year. But don't forget, when Medicare was introduced in 1965, it was estimated to cost $8.8 billion by 1990. The true cost was about $66 billion.
Well, the elderly are the poorest segment of society and thus require more subsidies from the rest of us, right? No. The Census Bureau reports that poverty among the elderly was 10.2 percent in 2000, whereas the child poverty rate hovered around 16.2 percent. Besides, some 76 percent of the elderly already have prescription drug coverage through private plans, Medicaid or pensions. Of the 24 percent who lack coverage, some are not sick. But they'll surely get Viagra and more if they're subsidized.
In addition, the presence of a government entitlement will cause those employers who do provide a drug benefit to their senior employees to drop it, thus increasing the pool of those dependent on the state. Why not target assistance only to those who need it?
As JWR contributor Deroy Murdoch suggests in National Review magazine, a conservative approach to the drug benefit issue would permit those who like Medicare to keep it. The elderly poor would receive subsidies to purchase private health coverage that included prescription drugs. As incomes rose, the subsidies would fall. Instead, Congress proposes to tax all of us, including strapped families with young children, to pay for Lipitor for Ted Turner -- now and forever, entitlements without end, amen.
Another gem the Republicans are not opposing -- in fact, many are supporting -- is the drug reimportation proposal. This is the brainchild of some congressmen who looked at lower drug prices in Canada and elsewhere, and declared, "Hey, no fair." If this bill becomes law, Americans will be able to import American-made drugs from Canada and other nations, and thus enjoy lower prices.
But there's a worm in this beautiful apple. Canada and Europe enjoy low drug prices because their governments put price caps on drugs. Those consumers are, as the American Enterprise Institute's John Calfee explains in The Weekly Standard, "free riders" on our system. The United States is the only market in which drug manufacturers make a profit. That's why European pharmaceutical firms are flocking to America. In 2000, U.S.-based firms spent 24 billion euros on research and development, compared with 17 billion euros for European firms. (Europe has a larger population and greater total wealth than the United States.) Fifteen of the top 20 best-selling drugs worldwide are made in the United States.
It costs money, lots of it, to create new medicines. Of every 10,000 substances considered as new drugs, only 250 make it to animal testing. Only five are tested on humans. And only one gets FDA approval. People gripe about the cost of drugs, but the medical costs they save are hardly taken into account. A family member had a stomach ulcer a number of years ago. Before the drug Prilosec was available, people lost countless days of work, had costly and painful surgeries, and even died from stomach ulcers. Now, they take a pill for a few weeks and that's it. Cured. That's one example among millions. It is estimated that half of the extension in life expectancy experienced between 1971 and 1991 was due to new drugs.
Reimportation would result in one of two unintended outcomes: either prices would not drop because drug companies would decline to ship huge quantities of drugs to places like Canada, or worse, prices would drop and companies would stop research and development.
Time was, Republicans understood these things.
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