L. Neil Smith's
Number 231, July 13, 2003


The Great Medicare Drug Fiasco
by Todd Andrew Barnett

Special to TLE

If the recent congressional plan to spend $400 billion on Medicare drug benefits for the elderly is a practical joke, then none of us who see right through this politically- motivated agenda are laughing. After all, the idea is to place seniors who are already on Medicare under a new plan, which would subsidize private health insurers. (Let's face it—the new plan, which was just passed by the House and the Senate, should make taxpayers and senior citizens queasy in their stomachs.)

President Bush has just stolen the Democrats' ideas and tweaked them to suit his agenda. He is touting his new plan to expand Medicare to include prescription coverage for our grandparents, and he is doing this to score points with them. Remember—the elderly happens to be the largest voting block on this issue, and for them to find out that the government will cut deals with private medical insurers—deals which include subsidizing them and pharmaceutical firms to cover their drug benefit costs—is enough to satisfy them. After all these are our grandparents we're talking about, and this issue should be a big concern to us, considering that the statists on Capitol Hill just want to place our retirees more on medical welfare and that they want to nationalize our health care the GOP way.

If there is a difference between the Republicans and the Democrats, it's this: Democrats want to subsidize the elderly with checks coming directly from Medicare, just so that they could use the tax money to pay for their drug costs. Republicans, on the other hand, want to subsidize private insurers and pharmaceutical companies, just so that those seniors can sign up for inferior drug coverage plans from either traditional Medicare or HMO/PPO organizations. It would also allow them to purchase coverage from insurance companies. (Incidentally, the plan would restrict alternatives to traditional Medicare to three low health bidders per region.)

Those who think that seniors are given greater choices in drug coverage are deluding themselves. The choices are like the choice between socialism, communism, and fascism. Individual liberty and free enterprise are nonnegotiable and are not included in the package.

But you say, "What's the problem here? The seniors need assistance with purchasing medicine. As a wealthy society, we can afford it." Right?

Wrong! The tenet which says "a wealthy society can afford it" is terribly misleading on all counts. Such a government-mandated program will require taxes to pay for it. That means that working people like you and me will be fleeced to finance the program. And this is said to be done for the "moral good" of our society. But where's the "moral good" in that? Obviously, those who are coerced to pay and those who will end up receiving the benefits are unaware that they are acting in accordance with Marx's "From each according to his ability; to each according to his need." In a nutshell, sheer collectivism.

Even if "we" could afford to do this, does anyone in his or her right mind think that it would be worth it should the artificially-inflated price undercut the pharmaceutical industry? While many Americans like to think that the entire industry operates on the principle of greed, perhaps they should keep in mind that it is the reason why so many life-saving drugs have often eliminated the need for more expensive surgeries.

If Bush and his collectivist stalwarts have their way, we can expect to see a gamut of problems plaguing the health care—problems that can be exacerbated by the following:

A Newer and Stronger Bureaucracy for Modern Medicine

If President Bush signs the plan into law (which is very likely at this point), one of the most obvious dilemmas that elderly patients can expect to witness is a new and stronger bureaucracy imposed on the health care profession and pharmacies. It will determine who pays for the costs of drugs, which patients are covered, for whom the drugs are paid, how pharmacies and physicians are remunerated, how private information is being distributed, which pharmaceutical companies benefit the most, and so forth. Since that is likely to be the most obvious case, we must -- and should—say that this is nothing but government control.

An Increase in Consumer Demand and a Higher Price Rx Program

We can expect an increase in consumer demand, simply because when the price is closer to zero, the more the product is consumed. There is no difference in medicine. Let's keep in mind that the $400 billion ten-year cost is not the actual cost, but rather a projected cost. This means that the projected cost will be significantly far below the actual cost, considering that Medicare's original estimates were off the mark. For example the 1990 cost of Part A hospital insurance was initially projected by Medicare as $9 billion. However, it turned out that its true cost was $66 billion.

Before long we will see a myriad of new restrictions on what prescription drugs seniors can purchase when we see Rx prices skyrocketing. The Rx program will be severely curtailed, although it will be touted as exquisite and liberating. We can expect to see more reductions in choices of as well as the freedom to choose one's treatment.

Price Controls Inducing Shortages and Stultifying Innovation

One of the most damaging side effects of this type of anti- capitalistic intervention will be the imposition of price controls. Price controls are merely government machinations designed to restrain the amount of return an entrepreneur expects to make in order to manufacture, distribute, and ship a new product to the market. It is often said that these controls are designed to rein in the budget, but that is just plain sophistry. Such controls eviscerate any entrepreneur's chance of productive output. Anytime the leviathan mandates prices below market-approved prices, shortages will be induced. This will affect the supply, development, and availability of new drugs, which will in turn spike prices faster than anyone expects.

How will these controls stultify the development and creation of new drugs, you ask? It's simple: said controls, imposed in an effort to rein in prices for Medicare participants by placing restrictions on insurance premiums or managed-care fees, will hike prices for non-Medicare participants in an effort to recoup losses incurred on the pharmaceutical firms. Perhaps one should have figured out from the beginning that, in order to market a new drug, one must spend hundreds of millions of dollars to do so. Because of these new cost restraints, no one will take the risk of investing in that new product without an appealing return.

The Implementation of Socialized Medicine

If President Bush and his stalwarts have it their way, they will invariably harm the American consumers; however, it will provide help to those who want to nationalize the health care industry (in other words, placing the entire profession under the federal thumb). The so-called "medical reforms," which were implemented within the last few decades, have been paving the way for the implementation of socialized medicine.

Regulations, which were passed to improve things, have faltered, leading to the passage of more futile regulations, culminating in the dramatic decline of private "free" enterprise. (We must thank the liberal and conservative collectivists, considering that they have assigned blame on capitalism for this mess.) Inevitably advocates of socialized medicine will demonize the pharmaceutical firms and insurers and state that the industry must acquiesce to the dictates of the government, resulting in the eventual oblivion of the private health care industry—long after all are dissatisfied with the attempt to provide adequate drug coverage.


While proponents of health care reform coddle to the elderly by lulling them with false, empty promises, health care costs have been shooting through the roof, leaving taxpayers to foot the bill. While conservative collectivists are too busy pulling the wool over our eyes by making us think that we are still living in a capitalistic society (remember, there is no evidence that capitalism still exists), liberal collectivists try to point fingers at free enterprise, identifying it as the source of these problems. However, both sides know that this is a lie, and that it always has been such one.

When many physicians refuse to accept Medicare patients because of the low payout Medicare gives to them for their services, we shouldn't be surprised when pharmacies will eventually follow suit. But as usual the free enterprise system is named as the culprit behind this mess. The simple truth is that a free market health care system ceased to exist decades ago. Such a system would have not allowed cronyism—along with government machinations of these kinds—to exist and flourish in the first place. A health care system based on a true paradigm of free enterprise would have respected freedom of contracts and private property rights, not a paradigm in which special privileges and connections enrich health care special interest groups and crony corporate interests.

Ten years ago conservatives attacked President Clinton, Hillary Clinton, and Ted Kennedy for pulling a similar stunt on the American people. Now they are following in their socialist footsteps. It is now apparent that the "limited government" conservatives, who claim to idolize free enterprise, personal responsibility, limited government, individual liberty, private property rights, federalism, and the rule of law, are truly worshippers of fascism—a subtler version of socialism. Nothing could be more obvious than that.

© 2003 by Todd Andrew Barnett. All Rights Reserved. Permission to reprint any portion of or the entire article is hereby granted, provided that the author's name and credentials are included.


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