Hidden Costs of Social Programs

Recently, I was having a conversation with a conservative friend of mine.  Yes, I do have politically conservative friends;  only if they can have a civil dialog about politics.  My friend said that the Medicare part D prescription drug insurance was costing the U.S. too much money.  He didn’t say as much, but I think the message was that “here’s another social program that we can’t afford”.  I know it was the Republican party’s gift to “big business” but why would they create a costly social program?  (Relax.  I know that the Democrats give them gifts too.) 

The television program, “60 Minutes” aired a segment after the law was passed.  If my memory serves me, there were 19 key government representatives and staffers that strong-armed the bill through in the early morning hours around 2 or 3 A.M.  No one was watching C-Span at that time of day.  They held the ballot box open longer than usual while political pressure was being applied.  Their reward:  Every key player got a very high paying job in the drug companies.  So it was a really big favor.

What’s that favor, you ask.  Medicare can’t negotiate for price discounts for enormous volume purchases.  Medicaid can.  The VA can.  I repeat.  Medicare can’t!  The result:  The median price difference for the top 20 drugs as negotiated by the U.S. Department of Veterans Affairs (VA) is 48.2 percent lower than the prices under the Medicare plan.  Medicaid is able to negotiate their prices down by 30%. 

FamiliesUSA, a consumer watch-dog organization, found that the VA’s prices are lower for both generic and brand-name drugs.  In the case of two of the generics, the median price difference between Medicare’s plan and the VA plan is 94.5 percent.

So I have to agree with my friend.  Part D costs us too much.  But at least 48% of that is because is that it was a gift to big business.  But that’s not the whole story.  “Big Pharma”  has enjoyed windfall profits as a result.  They use those profits in interesting ways.  The year after Part D passed they spent $57.5 billion in marketing; much of that to consumers.  Here’s another interesting fact that doesn’t get published:  They have patent protection on new drugs so to recover their Research and Development costs.  This protection blocks competition and keeps the prices high.  It’s interesting to note that the year after our gift they spent 24.4% of their budget on marketing and only 13.4% on R&D. 

When you read these statistics, doesn’t it strike you as odd that a program that is a benefit to both the taxpayer and big business gets branded as a pricey social program that we can’t afford.  These manipulations of public sentiment don’t stop there.

We now have what the Republican’s have successfully, and for political purposes,  named “Obama care”.  Here’s another program that has been misrepresented as a  government program to make it look like it is purely a social program that we can’t afford.  (Even though the Congressional Budget Office tells us it will save over $250 billion in ten years.) A real social program would contain a single-payer.  In this case, the insurance industry continues to be the private sector provider.  Another gift from Congress.  This time under the Obama administration.

Some of you know that I’ve written three books.  In the world of literature, there is a saying:  Fiction must be believable to sell.  I don’t worry about that fact because I write non-fiction.  What I do worry about is why the fiction, that the government represents the people, sells so well.  It sells so well that some of us are convinced that the programs designed to help us are not affordable, when in fact, a  large portion of the cost to us is a very expensive gift to big business.  

Robert DeFilippis