[Update at the end, with further thoughts on auctions]
Jason, a Pakers fan, and author of Healthcare Economist blog puts together a compendium of what's going on in healthcare thought.
We are saving money on drugs under Medicare-D:
Duggan and Morton find the Medicare Part D decreased average overall price by 12%. Patients of course pay even less than this 12% figure, because insurance pays for a portion of the drug costs. Thus, for patients moving from cash payment to Medicare Part D, net drugs prices for them decreased 24%.
This isn't news, but it's a healthy change of pace from the silly season that passes for electoral politics.
Falling prices are interesting against the backdrop of the report last month of private insurance companies dropping price insulation from their coverage of prescription drugs.
BARGAINING, AUCTIONS AND COSTS
How it is of much interest how to structure a series of well-formed incentives that have the potential to stop or limit drug-price inflation, without significantly slowing innovation.
As of now, I'm not sure that "give them the power to bargain" is the best, first solution. How about transparency, to start?Also, having the government become a formulary (the one who decides which drugs are 'standard') is a topic on which I need to hear more 'expert testimony'. It just seems such an enormously powerful role. It seems ripe for design insights.
Down in the weeds is a detail I didn't know: the baseline cost of drugs covered by the program's donut-hole approach is set by an auction process, an average-price auction. The insurance plan can ask for reimbursement based on the average-price auction results plus a fixed premium (34% at last call). The donut-hole refers to the jump-step 75%-0%-95% coverage thresholds, after the $250 deductible.
One can, in fact, use an auction to get a firm to reveal its cost structure and, thereby do cost-plus pricing. You have to use a second-price auction, though.
CROWD OUT
Another bit I didn't know: CMS (Centers for Medicare and Medicaid Services) subsidizes non Medicare-D plans, to avoid "crowd out". The article says, "firms that provide prescription drug coverage to their retirees."
