Contra Trump, Drug ‘Negotiating’ Would Save Zero Dollars

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In the annals of fact checks, there have been few episodes as dramatic as Fox News host Chris Wallace informing Donald Trump that the “savings” he was promising from Medicare drug spending was nearly four times the total amount that the government spends on it each year.

In other words, his promise was literally impossible. You could eliminate the entire program and not come close to what Trump says you could save.

But there is a deeper problem with Trump’s absurd promises when it comes to this program: the actual savings from his proposal would be zero dollars, at best. That’s according to the Congressional Budget Office, among numerous other experts who have reviewed the matter.

At issue is a pet policy of liberals like Sen. Bernie Sanders to give the government greater authority to set prices for the drugs they buy. Currently, the government purchases at market prices, which already face downward pressure from the normal economic laws of competition and supply and demand.

Proponents promise that if the government could “negotiate” with the drug companies, it could drive down prices. In reality this means the government would have the authority to tell these companies here’s the price, and if you don’t match it you can’t sell to Medicare patients. It might sound similar to how insurance companies and other providers operate on a daily basis, but there’s a crucial difference: Medicare patients can’t choose another provider unless they want to pay for it out of pocket. Thus the government’s “negotiation” is more like an “offer you can’t refuse” than a straightforward back-and-forth. For patients, the experience is tantamount to rationing.

More importantly, the process, which has been tried plenty of places doesn’t actually work at its intended goal of lowering drug spending.

Like so many other cases, the subtle distortions to the incentive structure that come with government control end up wreaking havoc on the final results. Here, doctors, unable to prescribe the more expensive drugs they want to, end up prescribing more of cheaper, less effective drugs, costing the government more money.

This is why, for example, Germany and France both spend a greater portion of their healthcare spending on drugs than the U.S.

For these reasons and others, experts have estimated the savings from drug “negotiating” to be roughly zero dollars.

The CBO: estimated “negligible” savings. Medicare’s actuary: same thing.

Even the Obama administration, which included this policy in its left-wing dream budget it released in February, estimated no savings – no savings – from this policy.

Trump originally claimed this policy would save $300 billion a year, which is so absurdly wrong one wonders where he even came up with it.

But it’s equally dishonest for Sanders, Hillary Clinton and other people joining Trump in touting this policy to claim it will save money when all available evidence suggests just the opposite. All this is is a feel-good applause line for the socialist candidate. The fact that it has as much traction as it does is a shame on our public discourse.

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bobmontgomery
March 4, 2016 4:50 pm

You’re right that tall tales get told when candidates are running for office and running their mouths. Did Trump stretch it? According to Fox News, he did. So the question becomes – which is worse Trump stretching it, while driving home the very valid point that there is vast waste, fraud, corruption and abuse in every department and every agency of the US Government, CONTRA the meme that all we have to do is get rid of “entitlements” and everything will be rosy…Or, FOX News thinking they had to make a gala graphic production in their opposition research duty….Or, the… Read more »