High drug prices in the context of a botched health care system

by Daniel R. Hoffman, Ph.D.

Published Jan. 29, 2016, 12:49 p.m. ET

The problem of unaffordable drugs can only be adequately addressed within a comprehensive, health care program. The Affordable Care Act, aka Obamacare, fails to provide even a start on achieving a health care program capable of meeting the overarching goals of access, affordability and quality.

According to a poll conducted by CBS News this month, only 40 percent of the U.S. public supports the Affordable Care Act and 52 percent disapprove of it. Among Republicans, nearly 80 percent disapprove, 70 percent of them strongly. In contrast, although the majority of Democrats approve of the law, only half those who favor it express strong support for it.

This popular coolness toward the ACA is understandable. Even as an initial step toward universal health care for all Americans, the ACA amounts to a slow-moving train wreck.

Its most fundamental shortcoming is that it does not provide affordable coverage. More people are finding that the available plans are inadequate, even as they stick people with high, out-of-pocket costs in the form of deductibles and co-payments.

Although the ACA's apologists point to a leveling trend of health care costs since its implementation, they neglect to mention that most of the spending moderation results from the lack of affordable coverage. People who cannot meet the escalating deductibles or co-pays simply postpone or avoid seeking care.

ACA advocates such as Hillary Clinton claim to favor an incremental approach. They argue that Obamacare advances the cause of universal, affordable care by virtue of improving the current, employment-based approach where 55% of Americans obtain health coverage through their work. The problem is that the ACA is unsustainable because it creates perverse incentives to employers.

Businesses quickly saw that employees earning below the average wage get better deals from the government-supported exchanges and Medicaid. This incentivized many employers to radically change their employee benefits and develop plans for restructuring the entire workforce at some companies. Health care coverage under the ACA incentivizes small businesses to remain small and it encourages all companies to prefer part-time workers, contract labor, and outsourcing rather than full-time employees. As John Goodman wrote in HealthAfffairsBlog last June, the ACA treats "people at the same income level very differently depending on where they get their insurance, how many hours they work, how many other employees they work with."

In time the ACA's basic premise of making insurance companies the controlling agents of health care, an approach borrowed from the Swiss and Dutch systems, will sink the entire program. While those two countries tariff the premiums of health insurers, no such regulated rates apply here. One reason Americans pay two to three times more per capita for health care than other advanced nations is the high overhead and so-called "administrative" costs created by under-regulated, private insurers. The ACA has done nothing to reduce those costs. One study estimates that Obamacare will add another $274 billion in administrative costs by 2022.

So while Mrs. Clinton says a single-payer, Medicare-for-all system will merely re-open the vituperative rancor of 2009 that accompanied the ACA's proposal, such criticism is highly disingenuous. Any suggestion for improving U.S. health care will engender cries of doom. That is because all Republicans and some Democrats act on behalf of the sectors benefitting from the present system – drug companies, device makers, insurers and providers.

Clinton's own 1993-94 proposal was a neuterized, overly complicated approach that similarly skirted the basic problems posed by for-profit health care, yet the established interests considered it the end of civilization. At a time when 53 percent of registered Republicans deny that man-made actions have caused global warming, any call for enlightened legislation will run afoul of Republican theocratic fascists. Even many centrist Democrats that ostensibly accept science are guided by timidity, hypocrisy and opportunism that will dissuade them from a single-payer health care system.

So the context of high drug prices remains one where remedying the situation demands overhauling America's profit-first, everyone-for-himself, health care system. Until health care in this country reaches a tipping point where dissatisfaction becomes more widespread and intense, that seems highly unlikely. For now drug costs will force some people to choose among rent, food and medication.