Thanks to de facto U.S. subsidization of other countries’ drug prices, nearly half of all Americans are concerned about their ability to pay for normal health care costs.
That number has stayed remarkably consistent for the last 18 years according to a question asked by the Pew Research center. It’s even higher in Arizona, primarily because of doctor and nursing shortages in rural communities.
According to the University of Arizona Center for Rural Health, every Arizona county is experiencing severe shortages of healthcare professionals, as well as increasing healthcare costs and decreases in quality.
Due to cost increases of healthcare, several Arizona hospitals have closed their doors. Cochise Regional Hospital in Douglas is just one example of these side effects, they closed their doors in 2015. The closure continues to rattle residents and placing untenable workloads on local emergency services. In lieu of dedicated hospital staff, Douglas residents began calling the local fire department almost a dozen times per day, placing the community at risk by distracting them from their other duties.
Unfortunately, new legislation in Congress will only make things worse.
Members of Congress have introduced proposals that should scare us all—allowing government officials to set the price of medical care. In July, the Senate proposed doing so with the Prescription Drug Pricing Reduction Act, which would price-fix the cost of prescription drugs under Medicare.
The House is also considering using a similar remedy, called binding arbitration, which would allow a government-appointed individual or panel to set the market’s prices.
Proponents of both measures believe that imposing price controls on drugs will safeguard patients. Unfortunately, however, past case studies suggest that doing so will cost Arizonans more money and reduce access to care in the long run.
For the past several decades, Maryland has utilized an “all-payer” system, which allows the government to set prices for hospital services in specific regions.
According to a 2019 study by Manhattan Institute scholar Chris Pope, it has resulted in higher Medicare payments across the board. While Medicare rates are traditionally much lower than private rates, in Maryland they are a whopping 40 percent higher than the national average for inpatient services and 60 percent higher for outpatient services.
Price controls on drugs are the equivalent of shooting the messenger rather than the orchestrators. While many like to point fingers at drug companies, the real culprit to high U.S. costs is anti-competitiveness overseas.
Congress has sat idly by while other countries have price-fixed their drugs below cost. Rather than impose pressure on other countries abroad, price controls on U.S. manufacturers will increase operating costs on healthcare innovators themselves, which could lead to higher consumer prices for less quality drugs over the long run.
Additionally, price controls can reduce access for patients to life saving drugs. As reported in a study by the Galen Institute, nearly 290 new medical substances were launched worldwide between 2011 and 2018. Of these, the U.S. had access to 90 percent. In countries with price controls, access was far less, 60 percent in the United Kingdom, 50 percent in Japan, and only 44 percent in Canada.
Rather than create this lose-lose scenario for innovators and consumers alike, Congress should finally go after the true stimulant to the inflated prices – reckless healthcare policies abroad.
The people of Arizona need a cure to this problem, not a placebo. The US is a world leader in research and development of life-saving medical care because we have a free market system. History has proven that price controls fail the very people they are supposed to help, and Congress should reject them outright.
- Sean Noble, Phoenix, is the president of American Noble, an Arizona nonprofit dedicated to promoting free-market policy. He is also a former chief of staff to Arizona congressman John Shadegg.