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Politics : Politics for Pros- moderated -- Ignore unavailable to you. Want to Upgrade?

To: LindyBill who wrote (19704)	12/14/2003 12:30:43 AM
From: LindyBill	Read Replies (1) \| Respond to of 793697

Yep. Just as sure as "God made little green apples." And probably in the next ten years. There is a visceral hatred out there for the Pharmaceutical Companies. Next Step: Drug Price Controls By Jonathan Oberlander and Jim Jaffe Jonathan Oberlander teaches at University of North Carolina-Chapel Hill Medical School. Jim Jaffe was a House Ways and Means Committee staff member working on health care issues when the first Medicare drug bill was enacted in 1988. washingtonpost.com When President Bush signed the Medicare drug law last week, he quietly began the countdown to the date when the government begins to impose strict price regulation on prescription drugs for the elderly. While the legislative language suggests otherwise, most health analysts of all political stripes concur that regulation is the likely outcome. The key question now is how quickly it will come. The bill clearly provides substantial short-term gains for drugmakers. It will likely impose long-term pain as well. If the drug firms are deft enough to delay price controls and moderate their impact, they may have made a smart deal. Taking the legislation at face value -- always a risky procedure -- makes this threat appear unlikely. After all, the law explicitly says that the government won't negotiate over prices or impose controls. The bill bends over backward to protect and extend the role of private intermediaries rather than relying on federal regulations and bureaucrats. And it avoids legalizing the reimportation of drugs from Canada. With the baby boomers on the horizon, the Medicare drug benefit seems to be a windfall for the drug industry. But health care providers who have already been down this road may have a different perspective. When Medicare was enacted in 1965, it barred the federal government from "exercising any supervision of control over the practice of medicine." Partly to deter a physicians strike, doctors were promised that they'd be paid at the usual and customary rates that insurers such as Blue Shield had set over the years. Hospitals got an even sweeter deal -- reimbursement that paid them essentially whatever their costs were, with a bonus on top. In addition, Medicare spared both hospitals and physicians direct federal administration, instead allowing them to choose private administrative intermediaries that would pay their bills. Since there was little reason why anyone offered a blank check would reject it, providers were fairly relaxed about provisions that locked them into the program over time. Now it is difficult and expensive for doctors to drop their affiliation, and nearly impossible for most hospitals to do so. Will things go differently with drugs? Time will tell, but it seems unlikely. The government has habitually responded to budget stresses by changing the reimbursement mechanism and lowering payments. Whatever one thinks of government efficiency, this practice has worked well. Over the past two decades, physician and hospital payments have been regularly cut. Because hospitals spent more, they were the first to get the bad news. In 1983 Congress enacted the Prospective Payment System. Instead of paying hospitals retrospectively for whatever they charged, Medicare imposed a system of administered pricing that allowed the federal government to set payment rates. Payments quickly declined precipitously. A few years later the Medicare Fee Schedule for physicians was introduced. It was a terribly elaborate scheme that was based on measures of the complexity, time and resources involved in physicians' services. Its advertised purpose was to establish a fair and scientific basis for Medicare payments to physicians. But ultimately it divorced doctors from their historical and customary fees. As with hospitals, Medicare imposed a system of administered pricing on doctors. By this time, of course, many physicians were dependent on their Medicare patient base and simply couldn't afford to walk away from the program, despite the lower reimbursement rates. Both Medicare hospital and physician payment regulation were supported by Republican presidents in the name of controlling federal spending. The Johnson administration generosity of the 1960s was replaced by the Republican restrictions of the 1980s. Fiscal exigency overwhelmed ideology. Whether that's portent, precedent or an irrelevant bit of history is the question of the moment. We now have a system in which the government pays hospitals and doctors what it thinks it can afford, subject to the usual lobbying to adjust prices. Not surprisingly, some of those lobbyists succeeded in getting aid for their clients in the Medicare drug legislation. But they didn't challenge the basic premise that the government pays what it chooses. Perhaps drugs are a different case. Perhaps the pharmaceutical firms that are so skilled at creating miracle drugs can create a political miracle and preserve the pricing power as well. But anticipated cost pressures -- which the drug bill will make worse -- make it unlikely that they'll be able to prevail over time. In short, they've made a deal with Medicare that looks very similar to that made earlier by other medical providers in the past -- a boost in business and profit in the short run that's subsequently replaced by tight price controls. If Medicare's history is a guide, the blank check for America's pharmaceutical industry will soon be canceled. Conservative legislators of the past argued regularly against federal aid programs on the grounds that repugnant government controls would inevitably follow. While that argument was abandoned during the congressional debate about a Medicare drug benefit, it was true then, and it is true now. washingtonpost.com