Don't say you weren't warned. It was
predicted that the Democrat-controlled Congress would pass
legislation making health care and health insurance more costly.
Behind Democratic rhetoric there has always been history -- which
was a good indicator that "the probable effect of any legislation
they pass will be to make health care and health insurance more
expensive."
Those who ignore history are doomed to repeat it, and for this
Congress ignorance is bliss. Along with some Republican
accomplices, Democrats have no shortage of health-care
legislation that will do the opposite of its intended effect of
making health care more affordable. The three bills that have
garnered the most attention during this Congress are the Mental
Health Parity Act, a bill to give Medicare the power to negotiate
prescription drugs, and reauthorization of the State Children's
Health Insurance Program (SCHIP).
Mental Health Parity Act
The Mental Health Parity Act (S. 558) is being pushed by Senator
Pete Domenici (R-NM) in conjunction with Senators Mike Enzi
(R-WY) and Ted Kennedy (D-MA). It would require that health
insurance policies that provide coverage for mental illness to
provide it in the same way that they provide benefits for other
conditions. Thus, if the co-pay to see a family doctor is $20,
then the co-pay to see a psychiatrist must also be $20.
Proponents of the mandate claim that it adds little to no extra
cost to health insurance. They point to a study
showing that there was no cost increase in mental health benefits
when mental health parity was enacted in the Federal Employee
Health Benefits (FEHB) program.
The reason costs didn't increase is that the use of mental health
benefits didn't increase either. Most of the plans in the FEHB
used managed care organizations to manage the mental health
benefits, suggesting that use didn't increase because the
insurance programs restricted access to benefits.
Other research, which examines programs that didn't restrict
access, suggests that mental health parity is one of the most
costly of benefit mandates. Using actuarial data, the Council for
Affordable Health Insurance, an insurance industry group,
estimates that it can add between five and ten percent to the
cost of a health insurance policy.
Few of the likely consequences of imposing a mental health parity
mandate are good for employees. Forcing insurance programs to
cover mental health the same way they cover physical illnesses
and conditions will result in more expensive health insurance.
That means more businesses will increase their insurance premiums
or drop their insurance altogether, resulting in an increase in
the number of uninsured. Businesses might simply drop their
mental illness coverage from their insurance policies altogether,
meaning that employees will have less access to mental health
benefits.
Medicare and Prescription Drugs
When Nancy Pelosi became Speaker, she promised to give Medicare
the authority to negotiate with drug companies for lower drug
prices within the "first 100 hours" of this Congress. Although
that effort has stalled, it will no doubt hang around the halls
of Congress as long as the Democrats rule the roost. Of course,
it is "negotiation" only in a very loose sense. Other government
agencies that negotiate drug prices require drug companies to
sell them drugs at no higher than the average private-sector
price of those drugs. If Medicare ever gets that power, it may
lower prices for Medicare patients, but it will increase the
price of drugs for those with private insurance.
Drug prices will rise in the private sector because drug
companies will want to maximize the price they receive from
Medicare. The price Medicare will pay will be based on the
average price in the private sector. So, the higher prices are in
the private sector, the greater the average price will be. The
higher the average price, the greater the reimbursement the
pharmaceutical company will receive from Medicare.
This phenomenon has already played itself out in Medicaid, the
government health insurance program for the poor. Medicaid bases
the price it pays for drugs on the average private-sector price.
According to Professors Mark Duggan and Fiona M. Scott Morton,
"When Medicaid is a large part of the demand for a drug, this
creates an incentive for its maker to increase prices for other
health care consumers." Duggan and Morton's "estimates imply that
a 10-percentage point increase in the [Medicaid market-share of a
prescription drug] is associated with a 7 to 10 percent increase
in the average price of a prescription."
Of course, should this happen, the Democrats and their allies
will cynically blame rising drug prices on "greedy"
pharmaceutical companies gouging patients. Could letting Medicare
negotiate drug prices work out better for them?
Tomorrow: SCHIP
reauthorization -- socialized medicine on the installment
plan.
topics:
Health Care, Nancy Pelosi, Business, Medicaid, NATO, Medicare
