In other words, the very interventions we were told would make healthcare more affordable have only allowed pharmacies, insurance providers, and drug companies to extract even more money from American consumers. And what’s the solution Democrats like Warren and Republicans like Braun seem to agree on? Even more interventions. This time, we’re told, the interventions will really make healthcare more affordable.
That is Washington at work.
August 10, 2019: United States Senator and Democratic presidential candidate Elizabeth Warren greets supporters and speaks to fair-goers at the Iowa State Fair political soapbox in Des Moines, Iowa.
Two weeks ago, I wrote about the problems with Joe Manchin’s argument that Congress needs to reject the “extremism” in its ranks if it’s ever going to solve the many problems facing Americans.
I argued that the opposite is true. That Congress is almost entirely unified behind a specific pace of progressive interventionism where the predictable consequences of previous interventions are perpetually used to justify more intervention. In this cycle, the government grows, the economy sputters, and the politically connected grow rich.
Then last week, as if to prove my point, Democratic senator Elizabeth Warren (D-MA) and Republican senator Mike Braun (R-IN) sent a letter to the Department of Health and Human Services (HHS) imploring the agency to address one of the consequences of Obama’s Affordable Care Act.
The letter was a response to an investigation by The Wall Street Journal’s Joseph Walker, who found that some insurance companies were paying significantly marked-up prices for certain generic drugs. Some, such as the generic version of the cancer drug Gleevec, were a hundred times more expensive when paid for through insurance plans.
The reason the insurance companies are willing and able to pay these absurd prices is because they are the owners of the pharmacies on the other end of the transaction. And in many cases, they also own the so-called pharmacy-benefit managers—the entities that negotiate drug prices with pharmaceutical companies.
That revelation supposedly drove Senators Warren and Braun to pen their letter to the HHS. Yet, as the Wall Street Journal editorial board explained on Saturday, all of this is a predictable consequence of a provision in the Affordable Care Act called the medical loss ratio (MLR), which was championed by Senator Warren.
The MLR tries to impose a cap on insurance company profits. It requires them to spend at least 80 percent or 85 percent of the revenue from premiums on medical claims. Democrats like Warren claimed the MLR would reign in insurance company profits and “make health spending more transparent.”
Instead, insurance companies began merging with and acquiring pharmacies and pharmacy-benefit managers, which they have used to indirectly raise their own profits by forcing higher drug prices on their customers—all while remaining MLR compliant.
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