Magazine Article | October 25, 2017

Republican Dysfunction Could Result In Radical Democratic Health Agenda

Source: Life Science Leader

John McManus, president and founder, The McManus Group

The Republican Party’s dysfunction in handling healthcare issues has dominated the news for the entire Trump presidency. Now many political analysts believe the Republican base’s frustration with the inability of the party to repeal Obamacare, despite controlling both chambers of Congress and the White House, makes a Democratic takeover of Congress in 2018 a real possibility. Midterm elections are low-turnout affairs, and the side that is most energized generally wins. Plus, the president’s party almost always loses a substantial number of seats in midterms.

An examination of Democratic health priorities is therefore in order.

Last Congress, Senator Bernie Sanders (I-VT) introduced his single payer “Medicare for All” legislation without a single cosponsor. A few weeks ago with great fanfare, he rolled out the identical legislation with 16 Democratic cosponsors, including the leading presidential contenders for 2020 — Elizabeth Warren (D-MA), Kristen Gillibrand (D-NY), Kamala Harris (D-CA), and Cory Booker (D-NJ) — who apparently believe support for this leftist legislation is necessary to demonstrate their bona fides to the Democratic base. A companion House bill now has 120 Democratic cosponsors, more than half of the Democratic caucus.

Oh, what a difference a year makes! As liberal Washington Post columnist Dana Milbank observed, “The Democrats Have Become Socialists!”  How so? The bill:

  • requires every American — other than those enrolled in the Veterans Administration and Indian Health Service programs (stellar programs, you know) — to enroll in the government-run Medicare program.
  • requires all healthcare providers to sign participation agreements.
  • prohibits employer coverage or individual purchase of insurance for benefits provided by Medicare.
  • requires the Secretary of Health and Human Services to negotiate the price of prescription drugs and establish a national formulary.
  • eliminates out-of-pocket spending on all healthcare items and services, except for copays on brand-name drugs to encourage generic utilization. (You can’t make this up.)

Radical stuff! How would it be financed? The bill does not specify the mind-boggling funding necessary to feed this beast, but Senator Sanders later issued a white paper delineating a series of “options” including:

  • 7.9 percent payroll tax on employers
  • 4 percent income tax on all individuals
  • substantial tax hikes on individuals making more than $250,000 with a top marginal income tax rate of 52 percent, a new “wealth tax,” increases to the estate tax, limitations on deductions, and hikes on capital gains
  • nearly $1 trillion in new corporate taxes

These job-killing and confiscatory tax hikes are still likely to fall well short of the full cost of the program. Emory University Professor Kenneth Thorpe, a well-known, centrist health economist, estimates the program to cost an average of $2.5 trillion a year, creating a financing shortfall of $1 trillion annually.

Sanders’ home state of Vermont scrapped its single payer plan before it even went into effect because of the inability to control costs. The Vermont law would have required an 11.5 percent payroll tax on businesses, plus an additional state income tax of up to 9.5 percent. The plan would have covered about 94 percent of Vermonters’ healthcare costs on average, not including adult vision or dental coverage. But Democratic Governor Peter Shumlin pulled the plug, citing the inability to control costs and calling it the biggest disappointment of his career.

Of course, government cannot control demand for healthcare services. It can only control the supply by deciding who gets what, when, and how. It does so through a raft of regulations, fee schedules, and administered prices. If resources cannot adequately meet demand, rationing of care is likely where patients are delayed or denied access to certain items or procedures that are in high demand. And that is precisely why such proposals must be defeated.

It is easy to dismiss single payer as a pipe dream. But let’s not forget that Senator Sanders — an avowed socialist — nearly won the Democratic nomination against the most famous, well-connected, and credentialed woman in the world. President Trump’s takeover of the Republican Party from mainstream, market-focused Republicans has shrouded the radical changes that have simultaneously transformed the Democratic Party.

The slow-rolling collapse of Obamacare has not made Democrats rethink that top-down, government-focused approach to healthcare. Rather, it reinforces the emerging consensus of their progressive base: Even more government control is needed because Obamacare relied too much on the private sector (read: heavily subsidized and regulated insurance companies). Government must literally control the entire healthcare system — comprising nearly one-sixth of the economy.

March-in Rights
If this is not enough to make you yearn for the centrism of Barack Obama, then an examination of Democrats’ latest fixation on pharmaceutical policy may. Last year, 51 Democratic lawmakers led by Rep. Lloyd Doggett (D-TX) signed a letter calling on the NIH to issue guidance on when “march-in rights” could be used to bypass patents on drugs developed, at least in part, with federal funding.

The issue emanates from the 1980 Bayh-Dole Act, which was meant to give universities, small businesses, and nonprofits ownership of patents for inventions derived from federal funding. However, that law also includes a clause known as march-in rights to permit federal agencies to license a patent when “action is necessary to alleviate health and safety needs which are not being reasonably satisfied or available to the public on reasonable terms.” It has never been enforced in its 37 years.

The NIH has not issued guidance on when march-in rights would apply and denied all six petitions requesting it to exercise those rights. A common theme in the denial of those petitions was that concerns over drug pricing were not, in and of themselves, sufficient to provoke march-in rights. But the threat could be substantial. Some experts believe about one-quarter of priority-reviewed drugs could be impacted by the NIH fully exercising its march-in rights.

The Doggett et al. letter argues that the NIH must take a more aggressive approach to enforcing the law to combat high drug prices because many drugs “are not available to the public on reasonable terms.” The letter contends that simply issuing strong guidance would “reduce the need for having to actually exercise march-in rights and permit pharmaceutical companies to make more informed pricing decisions.” Informed of potentially losing patent protection based on a pricing decision may change behavior? Why, yes!

Congress could, of course, amend the statute to provide greater clarity and guidance on the circumstances when march-in rights could be applied. Rep. Doggett  stands to become the chairman of the Ways and Means Health Subcommittee should the Democrats take control of the House of Representatives.

John McManus is president and founder of The McManus Group, a consulting firm specializing in strategic policy and political counsel and advocacy for healthcare clients with issues before Congress and the administration. Prior to founding his firm, McManus served Chairman Bill Thomas as the staff director of the Ways and Means Health Subcommittee, where he led the policy development, negotiations, and drafting of the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Before working for Chairman Thomas, McManus worked for Eli Lilly & Company as a senior associate and for the Maryland House of Delegates as a research analyst. He earned his Master of Public Policy from Duke University and Bachelor of Arts from Washington and Lee University.