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.
So, to review, when the Obama administration followed Mitt Romney’s lead and forced every American adult to buy health insurance, it also imposed a cap on insurance companies’ profits. But the cap just led insurance companies to purchase pharmacies and pharmacy-benefit managers and raise the prices Americans have to pay for generic drugs, funneling that money into their own pockets.
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. The painful consequences of a previous intervention are used to justify more interventions that give even more power to politicians and bureaucrats and that enrich the politically connected firms who fund and lobby them—all while making the original problem worse, which again justifies more intervention.
This is the cycle that only the so-called extremists want to stop. The socialists, while dangerously wrong, are at least consistent. If the government really does have the benevolence and ability to eliminate poverty, why wait? While wrong, that is a much more coherent belief than the idea that we are perpetually a handful of targeted bipartisan interventions away from economic bliss.
But as most readers of this site will already know, the truth is that what’s needed is the other type of extremism. The American people’s biggest economic and political problems require radical solutions grounded in sound economics and a commitment to our natural rights. Services like healthcare are too important to entrust to those who have already failed us so badly.
