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Verifying Logical Conclusions: Medicare Part D and Good Health

July 28, 2011
8:52 am

It’s intuitive that giving seniors more affordable access to prescription drugs would lead to an overall improvement in their health and well-being.

That logical conclusion has now been supported by a study published in the Journal of the American Medical Association.

Researchers have found that, for seniors receiving Medicare Part D prescription drug coverage, non-drug related healthcare costs have decreased – by nearly four percent, or a little over $300 for every three-month period.  Most of these cost savings result from reductions in inpatient and skilled nursing facility care spending.  This is the first academic study that looks at prescription drug coverage’s impact on non-drug related healthcare spending.

This new evidence certainly reinforces the notion that Washington shouldn’t mess with a program that’s clearly not broken. 

As Tomas Philipson, a professor of public policy at the University of Chicago, points out in a Wall Street Journal op-ed this week, the push to impose Medicaid-type price rebates on the Part D program will have severe ramifications.   Forcing pharmaceutical manufacturers to provide substantial rebates to the federal government will be tantamount to government price controls and will result in both higher costs for Medicare and non-Medicare consumers and will also undermine pharmaceutical research and development.

Or, as Philipson explains, “Venture capital funding for the biotechs that kick-off research for new drugs is completely contingent on strong signs of profitability in terms of intellectual property, disease prevalence and reimbursement. The government’s proposed price controls will ultimately cause some of this funding to dry up entirely.”

Given the savings we’re seeing in overall healthcare costs from more affordable prescription drugs, imposing price controls wouldn’t be prudent from either a financial or a societal well-being perspective.

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