Saturday, June 14, 2003

Rx for the Elderly
I have not touched on health care policy much on my site, even though I came close to pursuing my graduate degree in that field, because it is such a complex and often misunderstood policy area. The average person understands, to an extent, what s/he needs in terms of health, but does not quite grasp the complex economic system driven by those choices. Over the past several decades we have systematically severed the link between demand and cost, through government and private insurance. Managed care has re-established a marginal connection via co-payments, and its limits on care has made consumers somewhat more aware of cost. Still, there is massive over-consumption of health care resources.
There are a number of shortcomings with our current system, but the one receiving the most attention now is a prescription drug benefit for seniors. The Senate and House are on the verge of passing competing plans that would have to be reconciled, but they leave more than a bit to be desired. Their complex formulas for coverage are nearly as arcane as our tax code. Now, there are some advocates who favor a full drug benefit for all seniors, as a part of Medicare. The problem with such an approach is that it lacks any form of cost control and would likely have artificially low co-payments that would increase over-consumption of health care resources. Others have proposed moving seniors into managed care as a precondition for a drug benefit. But I am not sure that forcing seniors into an unfamiliar system at such a late stage in life would make sense. It runs the risk of leaving too many people confused about their health care choices.
While I don't have the solution, I do have some criteria by which to judge any plan. It should be available to all seniors, but it would be means tested and premiums would be based on ability to pay. However, premiums should not be so high as to discourage healthy seniors from joining. There should be a co-payment schedule that would discourage over-consumption and would encourage less costly drug therapies. There would need to be some sort of review board to vet new drugs as they come onto the market to determine whether or not the plan would include the drug.
The major problem with including a drug benefit in Medicare is that same as any government run health plan- it is susceptible to political pressure. We must beware that the drug plan does not become overly generous, driven by political action from the AARP and the senior lobby. The system must be designed so that it does not become a profit mill for the drug companies and a wide open entitlement for seniors.


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