The federal-state Medicaid program has grown an average of 9.5 percent over the past four years. Although initially a small program created to provide health insurance for the poorest Americans, it is now the country’s largest government-run health insurance program covering as many as 50 percent of the births in some areas.
It has become a monster that is draining state budgets.
The House, under the leadership of Energy and Commerce Committee Chairman Joe Barton (R-Texas), has proposed ways to make the program more efficient and slow its rate of growth.
The Senate, under Finance Committee Chairman Chuck Grassley (R-Iowa) has decided to . . . well . . . feed the beast!
Under federal law, drug manufacturers pay states a 15.1 percent rebate on the brand name drugs they supply for Medicaid patients. Sen. Grassley wants to increase that rebate to 18.1 percent. Not surprisingly, governors are asking for a 20 percent increase.
In addition to the federally mandated rebate, many states require drug companies to pay what’s known as a “supplemental rebate” if they want their drugs placed on a preferred drug list, which is the list of state-approved drugs for Medicaid.
We suppose that Sen. Grassley reasons that forcing the drug companies to pay higher rebates would provide more money for the states to spend on health care for the poor.
But — and here is the irony — there is no federal requirement that rebate money (regular or supplemental) be used on health care. The state could use it for roads, buildings or to buy the governor an airplane.
In other words, more rebate dollars doesn’t necessarily mean more money for health care.
Mandatory rebates are a tax, in this case a tax on drug companies. It’s pay for play. It’s payola. It’s the government saying: If you want to sell your product to a state’s Medicaid population, you have to cross the state’s palm with some bucks —nearly a fifth of what you sell, under the Grassley plan.
And the state can take that money and spend it however it chooses.
Rep. Barton is trying to make Medicaid more efficient and less costly; Sen. Grassley’s plan would make Medicaid more costly and less efficient. Only one of these approaches is compatible with good-government and free market principles.