Our Common Good

Getting serious about Medicare solvency requires that we get serious about reducing health care costs in general. In his new book, Dean Baker offers two rarely discussed ways to reduce health care costs quickly. The first is the elimination of drug patents. Although they are taken for granted as necessarily existing, drug patents — and patents in general — should be understood as artificial, government-issued monopolies over the production of a certain drug. This government-issued monopoly allows pharmaceutical companies to charge exorbitant prices for prescription drugs which drives up costs for individual consumers and government programs like Medicare.

By constructing a non-competitive marketplace for life and death products like drugs, government policy undermines its own interests in reducing health care costs. Baker claims that consumers and the government pay around $270 billion more per year for prescription drugs than they would without drug patents. Patents are usually held up as necessary to incentivize drug research, but as Baker points out, the government already spends $30 billion a year through the National Institute of Health on medical research. Increasing that by another $30-$80 billion could completely replace the drug research being done in the private sector, an increase which would be more than offset by the massive savings on patent-free prescription drugs.

In addition to eliminating drug patents, Baker also suggests in a previous book that we use the tactics of free trade already used against low-wage earners to depress the wages of doctors. As it stands, doctors in the United States benefit from exorbitant salary levels that result from proctectivist licensing restrictions manufactured by the American Medical Association. They also benefit from policies which make it difficult for professionals to immigrate to the United States and practice, professionals who would likely demand less for their services. Doctors in the United States presently make about twice as much as doctors in other wealthy countries do. Intentional policies to increase competition among doctors in the United States would likely put downward pressure on the salaries of doctors which would ultimately decrease health care costs.

The last big way to decrease health care costs, although not a suggestion mentioned by Baker, is to implement a single payer health care system. Single payer systems across the world have much lower administrative expenses than private insurers which decreases the cost of health insurance to consumers.

These three proposals are just a few ways to get started cutting costs, a policy approach which will both reduce government expenditures and overall health care spending in the economy. Medicare and Medicaid are not the problem and never have been; spiraling health care costs are and will continue to be. Any approach which is not focused on bringing those costs down or checking their growth should be immediately dismissed as non-serious. That conservatives have endorsed none of these approaches and continue to pursue merely cost-shifting — an approach which is still unsustainable as the CBO projection demonstrates — reveals their self-proclaimed fiscal realism as the posturing that it really is.

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