Health care spending
The Washington Times
By Robert Goldberg
January 29, 2008
What do Hillary Clinton and the recent government data on prescription drug spending have in common? In both cases, the mainstream media got it wrong. Just days ago every reporter and pundit were predicting that Mrs. Clinton was on the verge of a major blowout in New Hampshire and that Barack Obama's nomination was virtually assured. We know what happened. Now of course, the media is furiously spinning in the other direction, calling her victory "historic" and the election a "horserace." Until the next primary.
With prescription drug spending, the media of course reported that it increased in 2006 by about 8.5 percent, more than last year because of increased Medicare drug spending. Health care spending went up overall too, by about 6.7 percent about the same as last year. So all the headlines and stories claimed that "drug spending fueled rising health care costs" "Drug benefit fuels Medicare spending" and so on.
But the press got that wrong too. And unlike electoral politics, the pundits didn't have to rely solely on exit polls and recycled "experts" for the intelligence estimates. They were all working from the same study, which was published in Health Affairs.
Drug spending for Medicare did increase. But that's not news because when you give 39 million people a new drug benefit that's going to happen. Apart from the fact that the Medicare Part D program is running at 20 percent under budget estimates, it is not fueling Medicare spending overall. Quite the opposite.
Even as drug spending has increased by nearly 9 percent as a percentage of total health care spending its share remains about the same. If it's fueling the rise in spending it is very efficient fuel. Indeed, the increase in drug spending corresponds nationally with a decline in the rate of increase in spending in hospitals, nursing homes and visits to the doctor.
Could it be that more drug spending is driving down the rate of increase in other health care spending, particularly in Medicare? Public money (mostly Medicare and Medicaid) pays for about half of those other expenses. The surge in drug spending, which includes a shift of the Medicaid drug population to Medicare coincides with this decline in spending in other areas.
What's more, the goal of the Medicare Part D program was to reduce the cost of prescription drugs for people with limited incomes and chronic illnesses. It has accomplished that. Studies have shown, most recently another study in health affairs, that by eliminating the co-payments for prescription drugs, people use more medicines. When that happens their chronic illnesses such as diabetes, blood pressure and depression improve. They use other, more expensive health care services, less often. They are happier and healthier. Which is the real value of medicine in the first place.
Does this relationship apply for seniors in general? It would be great to see more research done using current Medicare beneficiary data. According to earlier work by my colleague Frank Lichtenberg, Courtney Brown Professor of Economics at Columbia University's School of Business, it does. Access to newer drugs costs more money but is offset by a reduction in hospital, home health care and physician costs according to Dr. Lichtenberg's research.
In other words, the value of the Part D program is not just that it makes drugs affordable but that it makes new medicines rapidly available as well. Efforts to restrict access to new drugs through co-pays and formularies would not only discriminate against the poor and chronically ill, it would actually drive up spending across the board. (Dr. Lichtenberg has also found that Medicare Part D has increase drug usage by less than 5 percent nationally. So much for claims that it created a huge windfall for drug firms. ) What's news is that the media, which was so quick to bill the Medicare prescription drug program as a failure two weeks into it's existence, once again rendered a snap judgment so far from reality that it should have used Narnia as its dateline.
James Q. Wilson has observed that journalism, like so much scholarship, now dwells in a postmodern age in which truth is hard to find and statements merely serve someone's interests. Health care will be an important issue in the coming campaign. Accuracy is always a casualty of electioneering. Too bad journalists are increasingly part of the problem whether it's coverage of candidates or the concerns that shape our vote in the first place.
Robert Goldberg is vice president of the Center for Medicine in the Public Interest.
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