Here’s an idea that would save Americans billions of dollars.
Many businesses, such as restaurants and entertainment, give seniors a discount, while the rest of us have to pay the full price. It’s unfair. So why shouldn’t the government step in and negotiate those prices down so that we all get the lower price?
The answer is simple and easily apparent to most people: Just because a company or industry can provide discounted or free products to a fraction of the population, or to a broader population for a limited time, doesn’t mean it can provide them permanently to the majority.
That’s the logic missed by the Campaign for America’s Future. The organization claims in a new study—actually “study” is being generous—that since drug companies provide the Veterans Administration with substantial discounts on some products, they can do it for all seniors on Medicare, which the study claims would save $30 billion annually.
The VA represents a very small portion of the drug market—less than 2 percent of current prescription drug spending. That limit allows drug companies to tolerate the significant discounts imposed by federal law for VA-purchased drugs.
A vendor usually can substantially discount a small portion of its products to a few. That doesn’t mean that everyone can or should get the lowest price. Letting infants get into the theater or on an airplane free doesn’t mean those industries can let everyone on free.
But the Campaign for America’s Future thinks they can.
The Campaign also thinks the government is more efficient than the private sector and cites the oft-quoted 3 percent administrative cost figure for Medicare. However, had the authors done a little research, they would have discovered that Medicare’s official administrative-cost figure is just what it takes to pay the claims. Expenses like rent, management, and efforts to check for fraud and abuse, to name a few, aren’t counted in Medicare’s admin-cost figure. But they are part of the private sector’s administrative costs. In other words, the Campaign is comparing apples to oranges and trying to build policy from it.
By contrast, the people over at the Congressional Budget Office, who know a little something about policy and economics, say that letting the federal government negotiate prices for the Medicare Part D program would have a “negligible” impact.
For our money, we’ll go with the CBO—and wait for the Campaign’s new study on how much money the public would save in the theaters were forced to let everyone in at matinee prices.