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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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In the Pipeline

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March 22, 2010

The Health Care Bill: A Therapeutic Rant

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Posted by Derek

Since I've written occasionally about the current health care reform efforts here, I feel as if I should say something now that a bill has passed the House. To be honest, though, I'm having a bit of trouble getting my thoughts in order, although I do feel the need to vent. Readers who aren't in the mood for my political opinions can skip this one.

Here goes: first off, it's rather hard for me to get past my anger at being told (repeatedly, by both the President and members of Congress) that this bill will "bend the cost curve" and on top of that, actually reduce the deficit. This is, in this case, such a transparent lie that it indicates actual contempt for their audience on the part of those repeating it. We can start with history and general principles: I have yet to hear of a state or federal health care system in this country that has not ended up costing hugely more than it was ever slated to.

I can get more specific in this case, though, since the entire bill was carefully structured to show a spurious deficit reduction (in order for it to be pushed through the budget reconciliation process, without which it could not have passed at all). Costs are pushed out past the Congressional Budget Office's ten-year time horizon, offloaded onto the states (whose Attorneys-General are now frantically trying to figure out what to do), or just blatantly left out. In the last category is the "doc fix", the adjustment to Medicare reimbursement rates that had to be dropped from the current bill in order to hocus the CBO numbers. The firm understanding between the interested parties is that the House will quietly pass that in the near future when not so many people are paying attention, and damn the numbers anyway. As I said above, "contempt" is the word that keeps coming to mind.

To my mind, this bill will indeed manage to provide health insurance to a portion of those now uninsured, but at a ferocious cost. And to that point, I was unhappy with the amount of money the Bush administration spent, but had I only known what was coming, I would have enjoyed the fiscal restraint while I could. I believe that we're spending entirely too much money that we don't have, and not getting that much in return for it (other than lots of warm, heartfelt favors to friendly constituencies that can be expected to support the current administration).

And here's my last point: my own industry's trade association, PhRMA, believes itself to be in that last category. Whether you felt like it or not, if you work in the drug industry, you spent a lot of money to help get this bill passed. I haven't heard the details of the quid pro quo deals for our business, but no doubt there are some nice ones hidden in the recesses of the bill (or just outside it, like the doc fix). My worry, though, is that dealing with the government on this level is like dealing with a hungry bear. Sooner than we think, the costs of this bill will kick in. At that point, I predict that we will find ourselves in yet another Health Care Crisis, having failed to bend any cost curves whatsoever. Then the bear will turn its head to us again, but this time, with a new look in its eyes.

Comments (153) + TrackBacks (0) | Category: Current Events


COMMENTS

1. Yes we can on March 22, 2010 7:43 AM writes...

The drug industry are actually winners in this bill. The bill passes a provision allowing 12 year exclusivity in biologics. Also, since more people are insured, there will be more people buying prescription drugs.

The downside is that there will be a 85billion "fee" assesed over 10 years. This payout is determined by marketshare of companies making more than $5 million per year.


All in all, I think it's a good plan even though it comparable to Bush era spending. Providing relief to millions without access to health care is an admirable goal. I can't see anything as beneficial to the average American that came as a result of Bush era spending.

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2. RB Woodweird on March 22, 2010 7:50 AM writes...

So your position is that something even France can do

http://www.businessweek.com/magazine/content/07_28/b4042070.htm

the United States of America cannot?

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3. Old Timer on March 22, 2010 8:10 AM writes...

At first I was very excited about the idea of reeling in health care costs and getting more people insured. But the former is needed before the latter. I don't know the first thing about what's contained in this new bill, but I do know that discussion about actually decreasing costs seemed to disappear long ago. This is bound to fail (and by fail, I mean astronomical costs).

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4. Mark Polokoff on March 22, 2010 8:22 AM writes...

I couldn't agree with you more. It's documented that the bill was written by health insurance companies, and why not? They will reap a double windfall: 40 million Americans will be forced to buy their insurance that don't have it now, and the type and amount of care that one can receive will be determined by the government, rather than by your physician. And that's just for starters. Lurking inside this 2700 page behemoth are many nasty surprises that nobody in Congress considered when voting.

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5. Dachen on March 22, 2010 8:31 AM writes...

What does this mean to big pharma industry? Will be hard to market a high price patent product? More generic products are getting popular?

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6. road on March 22, 2010 8:41 AM writes...

Well, politics is the art of the possible. What do you suggest that could actually pass in today's political climate? Or are you suggesting that everything was fine with our health-care system before congress started meddling? I'm sick of all the potshots and complaints without any realistic, pro-active suggestions.

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7. alex on March 22, 2010 8:49 AM writes...

> I have yet to hear of a state or federal health care system in this country that has not ended up costing hugely more than it was ever slated to.

I have yet to hear of a government-run health care system in any of the dozens of countries that have them that has not ended up costing *hugely* less (per-capita) than ours, while delivering comparable or better benefits. I think on average, they cost around half as much.

The following specific criticism is factually wrong:

>Costs are pushed out past the Congressional Budget Office's ten-year time horizon

In fact, while the CBO says the plan will save $130bn in the first decade, it also says that in the next decade (i.e., beyond the "ten year time horizons") it will save nearly ten times as much.

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8. Marcus on March 22, 2010 8:49 AM writes...

The big Pharma fix that I know about-- from reading you, as I recall-- was the horrible medical devices tax. Another brazen lie is that this is somehow compensatory in nature, as though the device industry somehow signed up for it as a reward for the increased business they'll see.

The Democrats have to eat this one. I'm perfectly willing to cede them all the political benefits if this thing actually works as advertised. Fair is fair. But if, as is nearly certain, this blows up in their face, I don't want to hear any rubbish about how it's not their fault.

I have never voted a straight party ticket in my life. Never even considered it. But after this, my choices seem clear for the fall.

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9. LeeH on March 22, 2010 8:53 AM writes...

While I agree that in the short term we will almost definitely see no cost savings, this bill was the right first step. Why?

1. It's unconscionable that we allow people to go without health care, and to allow families to be ruined by the cost of treating disease. Creating a mechanism to help this is just the right thing to do. It's worth the risk to start the process of protecting these people.

2. We weren't going to get everything right all at once. C'mon, this is the government we're talking about. Improvement by successive approximations is all we can ask.

3. I have confidence that if we suck it up we can do at least as well as most of the rest of the industrialized world. Many people get great health care (myself included), but overall we suck at providing decent health care to most of our people, especially considering what we pay.

What we should do now:

1. Create one big insurance pool with everyone in it. Allowing people to opt out, even with a rather paltry penalty, is not going to cut it. If the auto insurance industry just had bad drivers in it, it would be a disaster too. People accept needing car insurance (even when they don't have accidents), they would accept having to pay for health insurance.

2. Force insurance companies to pay a fixed percent of revenues for health care. Companies in Massachusetts are pretty good about this, but it can't be said for much of the country.

3. Create a single medical records system. We pay double what most countries spend, 30% vs 15%. The savings in administrative costs alone would pay to cover the uninsured, and then some.

4. Force public disclosure of reimbursements to hospitals.

5. Change the patent law so that drug companies got a fixed number of years of patent protection for new drugs from the time it comes to market, not from the time it is disclosed. This would give companies a greater chance of recovering costs, and might promote less price gouging.

6. Graduate more doctors. More competition would keep salaries down, and there would be more doctors for rural areas.

7. Encourage centers of excellence, hospitals that would specialize more in specific clinical areas, to lessen expensive duplication. Remember the old footage of Russian PRK assembly lines? It was the right idea.

I'm sure there's lots more...

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10. SP on March 22, 2010 8:57 AM writes...

1) The medicare prescription drug bill, in fact, ended up costing less than projected so far (http://voices.washingtonpost.com/ezra-klein/2010/03/notes_on_cbo_skepticism.html)
2) The second ten year window, to where you say the "costs are pushed out," in fact has a much larger savings than the first ten years (although with a greater error bar)- 134B in the first 10 years, 1.2T in the second 10 years.
3) The bill was not passed through reconciliation at all. It passed with 60 votes in the Senate and 219 in the House. This is pathetic, Derek, you have basic facts wrong. Only the minor changes which remove the parts most people complain about ("Cornhusker kickback," etc.) are being done through reconciliation.
4) The doc fix is a separate issue from this bill. Whether it's done or not is totally separate from this, and baseline budget projections assume it's not going to be done either (since the CBO only scores written law, not proposals or what everyone thinks will happen.) So the bill was scored relative to current baseline- if the bill hadn't passed, the doc fix would happen anyway. Say the fix is $25B/yr- without the bill, the 10 year deficit change is 250B. With the bill, it's 250B - 134B- the 250 is constant because the fix happens either way (or, if you are concerned about cost controls, could be still implemented whether this bill passed or not.) The only thing Dems are doing on the doc fix is being more honest- it's passed every year anyway, they're just making it permanent instead of continuing the fiction that it will happen. It the same as how Bush never accounted for the cost of wars in his annual budget, they'd be allocated by "emergency" each year because that made the initial budget look better, and Obama decided to put them on the books even though this made it appear that his deficits were worse.
5) The general deficit projections (not related to this bill) are done by the same office and formulae that were used to score this bill. If you believe we have huge deficits ahead, then you should believe this bill will reduce them. If you think this bill will not match its CBO score, then you can't put any faith in the general deficit projections either. You can't pick and choose, and if there's any evidence that something may be incorrect, it's that the savings on the bill may be underestimated (http://www.commonwealthfund.org/Content/News/In-The-Media/2009/Aug/Congressional-Budget-Office-Has-Underestimated-Savings-and-Overestimated-Costs.aspx)
6) I find it quite ridiculous that the same people who complain about lack of cost controls are the same ones who complain about how the bill is too ambitious. I agree that this bill alone won't bend the curve enough over the long term, but it's the most ambitious program yet to do so, putting in place things such as comparative effectiveness research and incentives to pay for outcomes rather than volume. Doing nothing by definition doesn't bend the curve at all (and let's be honest, despite the Republican claims that they had alternative proposals, if this bill had died, the status quo is what we'd have for at least another 10 years.)
I guess I should have heeded the warning to skip this post, but I'm always astounded that there are people who know what they're talking about when dealing with scientific data who then make egregious errors of fact in non-scientific areas and are completely unaware or unrepentant about it.

Permalink to Comment

11. SP on March 22, 2010 8:58 AM writes...

I just posted this but it went for moderator approval (likely because I had links initially) but since I criticized Derek pretty harshly I wanted to put up a version that would post without approval:
1) The medicare prescription drug bill, in fact, ended up costing less than projected so far (link)
2) The second ten year window, to where you say the "costs are pushed out," in fact has a much larger savings than the first ten years (although with a greater error bar)- 134B in the first 10 years, 1.2T in the second 10 years.
3) The bill was not passed through reconciliation at all. It passed with 60 votes in the Senate and 219 in the House. This is pathetic, Derek, you have basic facts wrong. Only the minor changes which remove the parts most people complain about ("Cornhusker kickback," etc.) are being done through reconciliation.
4) The doc fix is a separate issue from this bill. Whether it's done or not is totally separate from this, and baseline budget projections assume it's not going to be done either (since the CBO only scores written law, not proposals or what everyone thinks will happen.) So the bill was scored relative to current baseline- if the bill hadn't passed, the doc fix would happen anyway. Say the fix is $25B/yr- without the bill, the 10 year deficit change is 250B. With the bill, it's 250B - 134B- the 250 is constant because the fix happens either way (or, if you are concerned about cost controls, could be still implemented whether this bill passed or not.) The only thing Dems are doing on the doc fix is being more honest- it's passed every year anyway, they're just making it permanent instead of continuing the fiction that it will happen. It the same as how Bush never accounted for the cost of wars in his annual budget, they'd be allocated by "emergency" each year because that made the initial budget look better, and Obama decided to put them on the books even though this made it appear that his deficits were worse.
5) The general deficit projections (not related to this bill) are done by the same office and formulae that were used to score this bill. If you believe we have huge deficits ahead, then you should believe this bill will reduce them. If you think this bill will not match its CBO score, then you can't put any faith in the general deficit projections either. You can't pick and choose, and if there's any evidence that something may be incorrect, it's that the savings on the bill may be underestimated (link)
6) I find it quite ridiculous that the same people who complain about lack of cost controls are the same ones who complain about how the bill is too ambitious. I agree that this bill alone won't bend the curve enough over the long term, but it's the most ambitious program yet to do so, putting in place things such as comparative effectiveness research and incentives to pay for outcomes rather than volume. Doing nothing by definition doesn't bend the curve at all (and let's be honest, despite the Republican claims that they had alternative proposals, if this bill had died, the status quo is what we'd have for at least another 10 years.)
I guess I should have heeded the warning to skip this post, but I'm always astounded that there are people who know what they're talking about when dealing with scientific data who then make egregious errors of fact in non-scientific areas and are completely unaware or unrepentant of it.

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12. milkshake on March 22, 2010 8:58 AM writes...

Now that I am unemployed and have to deal with the retarded COBRA bureaucracy just to get my dentist bill paid, suddenly the idea of universal health coverage does not seem so bad. Call it class welfare but I would rather have a costly entitlement for low -income folks rather than tax breaks for bankers who fuck over everyone from both ends, run the economy zugrund, and they still get their seven-figure bonuses while taking the federal bailout to the tune of tens of billions.

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13. David Arkham on March 22, 2010 9:02 AM writes...

Mark Polokoff: I think the real losers are the insurance companies. They get new customers, but they also have to insure people with preexisting conditions and cannot deny coverage if you become ill. Based on the costs of health care, they stand to lose a large amount of money if they have to start paying for that kind of insurance group.

I think pharma will did in fact cut several deals. One of which is patent exclusivity for biologics for 12 years.

http://www.nytimes.com/2010/03/22/business/22bizhealth.html?hp=&adxnnl=1&adxnnlx=1269266418-1CKGPBDJkn5/StiL4++0hQ

There are also some bits and bobs here and there, but that is the main point I think.

The real question then is how this bill reshapes the pharma landscape. Patent protection was not extended to small molecules. And in addition, the large companies have to pay fees totalling $85 billion over ten years.

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14. p on March 22, 2010 9:04 AM writes...

Quote: 6. Graduate more doctors. More competition would keep salaries down, and there would be more doctors for rural areas.


Yes, by all means, let's be sure to keep the salaries of doctors down. After all, it isn't as if they do the important jobs like financial guys, lawyers and bureaucrats.

Speaking of, I think all y'all kvetching about what this bill does don't have any idea. Like any massive federal bill, it will do what the bureaucrats say it will and there is damned little the elected leaders can do about it. It will be interesting, over the next decade to see how how the bcrats interpret it.


(To be fair, anyone who complains that a federal system will limit choice and create a horrible bureaucratic mess must admit that the current "free market" system has done exactly that while leaving vast numbers uncovered. No, the status quo wasn't good enough, but that doesn't mean this is a good bill).

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15. Marshall on March 22, 2010 9:09 AM writes...

Then the bear will turn its head to us again, but this time, with a new look in its eyes.

And the conversation will sound like a bit of dialog from Star Wars...
Lando: That was never part of our deal!
Vader: I am altering our deal. Pray I do not alter it further.

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16. Anonymous on March 22, 2010 9:12 AM writes...

#2, While I agree that this is a windfall for the insurance companies and that they are the single biggest beneficiaries of the new legislation, I have to roll my eyes every time I hear the talking point about how government bureaucrats are going to determine what type of healthcare you get and when. Members of congress have the "government healthcare" they love to demonize and I don't see any of them offering to voluntarily give it up or complaining that the government dictates their health care. Right now the insurance companies determine what is covered, what is not and for how much, they determine what tests you can take and what the level of reimbursements are. I guess "for profit" "private sector" "healthcare bureaucrats" determining how much and what type of care is o.k. but "government bureaucrats" not. Corporate insurance bureaucrats doubling premiums just when you need to use your healthcare or dropping your coverage if you don't take the hint and "go away" are just making an honest free market profit but government intervening and saying NO to corporate insurance death panels is just evil socialism or communism. Just let them eat cake or drop dead, right? Yes there are legitimate holes in the arguments on either side of the political divide, but the hysteria and over the top scare mongering stuff is just that.

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17. Wavefunction on March 22, 2010 9:16 AM writes...

I think simply that this bill will make 32 million Americans actually feel like waking up and going to work every morning to do their bit for the economy. That can't be all that bad. It's not perfect, but I think it's a positive development for the mental health of this nation.

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18. imarx on March 22, 2010 9:21 AM writes...

I'm sorry Derek, but it's hard to take you seriously when you wax nostalgic for the "fiscal restraint" of George "double federal spending and double the national debt in eight years" Bush. Between two unfunded wars, a completely unfunded trillion dollar expansion of Medicare, and trillions of dollars in tax cuts, where is this "fiscal restraint" you speak of? At least the current health care bill proports to be cost saving - Medicare Part D was passed without even a suggestion of how to pay for it. And for those of you complaining about the maneuverings used to pass this health care bill, you should read about how Medicare Part D was passed (sneak preview: it involves extending what is legally supposed to be a 15 minute vote into three hours while the Republican leadership browbeat its dissenting members into voting for it).

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19. Anonymous on March 22, 2010 9:36 AM writes...

P

I'm not defending the ridiculous salaries of the bankers, I'm just addressing the lack of physicians and how this lack has caused the market to push their incomes up.

And if you think they wouldn't do as good a job if they made less money, try visiting Western Europe or Canada. If doctors in the States were really in it for the money, they'd be bankers.

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20. milkshake on March 22, 2010 9:50 AM writes...

American Medical Associacion has been very effective in lobbying for regulations that stem the flow of foreign medical graduates to US, such as increasing the difficulty and number and cost of the exams required to pass in order to be eligible to apply for a residency training in US, cutting off state subsidies to hospitals for the residency training of non-US residents.

I wish ACS took the heed of AMA, instead of cheerleading for big pharma/chem manufacturing industry

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21. CanChem on March 22, 2010 9:53 AM writes...

As an aside to this: I'm Canadian, absolutely love my health care, and can't for the life of me figure out what the American fear of it is all about. After taxes (higher to pay for health care) I still take home more (as a percent) than my father-in-law in the US (after paying for private health care). And I have never had a problem going to see my doctor or getting any prescribed treatment.

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22. Derek Lowe on March 22, 2010 9:55 AM writes...

Imarx, the way Medicare Part D was passed by the Republicans was also outrageous. And as for fiscal restraint, Google "CBO deficit chart". You'll see that even the White House's own numbers (which, you can bet, are the rosiest available) show the smallest projected deficit to be well over anything that Bush had the nerve to run. The largest (this year, for example) break all previous records.

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23. m on March 22, 2010 9:57 AM writes...

I should add: Many foreign medical graduates used to enter under J visa. Now, J-visa stipulates the requirement to leave the country at the end of job and not to return to US for few years. Unless you get a waiver. Getting waiver has not been much of an issue for chemistry postdocs, but it became nearly impossible to get a waiver from J visa to transfer to H1-visa if you were a foreign medical graduate.

A friends in New York, a family with 3 young kids, both physicians, finished their residency. He got a tenure-track assistant professorship, she got staff physician job in a hospital. Their J-visa waiver was denied because they were foreign medical graduates, and despite them having good lawyr and appealing on grounds of hardship (3 young kids) they were denied and sent back to Europe.

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24. anonymous on March 22, 2010 10:04 AM writes...

Anytime you go to bed with the knowledge that you helped 32 million Americans, you can't feel that awful. CBO says not only will the plan break even, it will save us money in the future. Win and win.

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25. Mark on March 22, 2010 10:14 AM writes...

As a Canadian I can assure you that you won't like what's coming.

The Canadian system is cheaper because health care is rationed. Want an MRI? Prepare to wait a month or two. Want orthopedic surgery? Prepare to wait a year. Want the latest cancer treatment? Buy yourself a plane ticket to the US, it's not available here. Live in a rural area and need a primary care doctor? Put your name in the lottery and hope you win. However, if you're the Premier of Newfoundland, you can just fly to the US for cancer treatment. The rabble can find their own way.

Mark

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26. anonymous on March 22, 2010 10:15 AM writes...

Mark: That's not what the bill says though. There is no single payer government controlled system like Canada. Why would you think we will all of a sudden turn into Canada?

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27. Vader on March 22, 2010 10:20 AM writes...

I wonder why it is that, as soon as a discussion turns to politics, the average IQ drops into the single digits?

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28. Paul on March 22, 2010 10:20 AM writes...

The post that had a link to the French system and asked the question of if the French can provide healthcare why cant we. I just read the article, it states that costs have gone up from 7% to over 40% since inception. Deficits for healthcare have been run for quite some time was one of the main quotes and yet they will likely only make some minor fixes. Why? because folks want it to stay the same

So when you add 30 million people to the healthcare ledger and claim you can reduce costs. Probably not a good idea to use France as an example. At some point its unsustainable just like where we are with social security and medicare.

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29. p on March 22, 2010 10:20 AM writes...

Quote: And if you think they wouldn't do as good a job if they made less money, try visiting Western Europe or Canada. If doctors in the States were really in it for the money, they'd be bankers.


But how are you going to recruit more doctors if their salaries are lower, compared to bankers, lawyers, etc.? I teach a lot of kids who look at what they'll have to do to get into med school and survive and then what their life will be like. Many/most decide that the business school across the way looks more attractive. I know you're not defending high salaries in the slimier areas of finance, but the fact is people like to make money, under any system, and will gravitate to where it is. If you're told you can make as much with a 4 year degree as you can with a decade or more of grueling training/education, it's a simple calculation.

As to overall cost, if there is unlimited demand for a limited supply, the costs will go up. Somehow, they'll have to ration what is available if they want to bring costs down.

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30. SP on March 22, 2010 10:21 AM writes...

Say it with me now- Health care is rationed in the US right now. It's rationed by the size of your bank account, or by who you work for, or by whether you've been sick previously.

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31. Mark on March 22, 2010 10:25 AM writes...

Anonymous:

Correct, but what do you think the long term goal is? The bill defines a gov't panel that will approve/disapprove premium hikes by insurance companies. Not much of a free market anymore, now is it? Anyone who has taken a micro-econ course can tell you price controls don't work. There is no free lunch. Somebody in the end pays. You can try and get the rich to pay for it, but guess what? There aren't that many rich people in the US. In the end, the cost will be saddled on the middle class as either higher taxes and/or lower quality care (most likely both).

Mark

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32. Derek Lowe on March 22, 2010 10:26 AM writes...

SP (comment 10): one big reason that Medicare Part D has been coming as less expensive is that we in the industry haven't been turning out as many new drugs as the program planned for. (That's not my own opinion, that's from the government's own documents - see http://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2009.pdf, page 119). Note that expenditures for Part D are still growing substantially faster than GDP.

As for this bill not being passed through reconciliation, I'm puzzled by your argument. Would this health care bill have been passed if it were not aimed at the budget reconciliation process? No, because the Republicans would have filibustered it in the Senate. It's the very differences between the House and Senate bills that make all the difference. The reason it passed with 60 votes in the Senate is because the makeup of the Senate chamber was different then that it is now - you'll note that a Senator was elected from Massachusetts in the interim on the explicit platform of torpedoing the bill.

Pe