Two implications for health care in the Democrats’ economic plan

Congressional Democrats announced an economic agenda today called “A Better Deal.” The one-pager handed out to the media included this summary statement.

“We believe the best way to grow the economy is to grow and strengthen the middle class, instead going back to the failed trickle-down economics of the past.”

While this is the talking point, I’d argue that until now, the conventional economic orthodoxy of the Democratic Party since the Clinton years has been this:  that reducing regulatory restrictions for corporations allows for greater flexibility of capital and labor, which allows for stronger economic and wage growth.

Here are some examples from the Clinton years (here, here, here), and some from the Obama years (here, here), with a pinch of policies Democrats supported during the George W. Bush year’s thrown in (here).

Sure, there are exceptions to this thinking, but I’d argue for the most part, this has been party orthodoxy for the last 25 years.

Which is why the Democrats agenda today is so striking.  On the one hand, it’s simple:  three basic bullet points.

It targets creating higher paying jobs, regulating and negotiating drug prices, and ensuring better competition in the modern-day US economy.

It’s this last point that is so striking:  for the first time in decades, policy that addresses anti-competitive market concentration may be en vogue with Democrats.

Moreover, it’s not just Democrats that are moving in this direction.  Congressional Republicans may be in some ways, too, which could portend a significant reaction to the economic concentration of the last few decades.

Here are two things the health care sector should keep an eye on in the Democrat’s proposals.

1. Democrats have drug prices squarely in the cross hairs.  While PhRMA is one of the smartest, savviest advocacy organizations in America today, some in the industry they represent aren’t always as savvy.  See here and here for two good examples of what I mean and their political impacts.

This has caused some considerable political backlash in recent years, where there is now bi-partisan concern over drug pricing. However, more than just pricing, there is concern about the community ethic of the pharmaceutical industry.

Some might argue that the proper ethic is to be as successful as possible.  That may or may not be.  But, the political system in the US generally doesn’t appreciate self-interested action which comes at the direct cost of public coffers (via costs to Medicare or Medicaid), which results in criminal indictments (Martin Shkreli), or where one might ‘thumb one’s nose‘ at representative institutions.

Here is what that looks like, according to the Democrats.

“One recent study found that since December 2014, the price of 60 drugs more than doubled, and the price of 20 drugs more than quadrupled. The Government Accountability Office found that between 2010 and 2015, about one-in-five established generic drugs at least doubled in price. In that same time period, 48 drugs had a price increase of at least 500 percent, and 15 had price increases of at least 1,000 percent.”

So, when President Trump is also saying that pharma companies are “getting away with murder,” it becomes something of a low bar for the Democrats to try to beat up on pharmaceutical companies.

Expect Democrats to sponsor legislation to negotiate drug prices in Medicare, require greater financial transparency for pricing changes, and increase oversight of “price gouging” in the industry.

2. Consolidating health care organizations should be watchful.  While the ACA seemed to push greater coordination among health care stakeholders, sometimes that coordination turned into consolidation.  This happened both on the plan and the provider side.  And, the returns from consolidation were not always either clear, or clearly beneficial to consumers.

For example, the Anthem-Cigna merger, which came at the end of a run of other plan consolidations, was ultimately rejected by the courts as anti-competitive.

Now, health care organizations aren’t explicitly mentioned in the Democrat’s briefing paper, like cable companies are.  But, if you read these three principles of action the Democrats espouse, it’s not hard to see where some consolidating health care organizations might become a target.

  • Prevent big mergers that would harm consumers, workers, and competition.
  • Require regulators to review mergers after completion to ensure they continue to promote competition.
  • Create a 21st century ‘Trust Buster’ to stop abusive corporate conduct and the exploitation of market power where it already exists

This represents a new level of oversight of previously affirmed mergers that hasn’t existed since before World War II.

On the plan side, Republicans are already on record in opposition to health plan mergers specifically.  So, again, it’s not politically challenging for Democrats to also want to take on consolidating health plans.

On the provider side, almost 20% of all hospitals were seeking mergers, since 2015, according to an article in JAMA.  Moreover, the article’s research says not a single region in the United States was considered “highly competitive,” and “nearly half are ‘highly concentrated’.”

That sounds like a prime target for a Democratic caucus that is still upset over the “too big to fail” aspect of the 2008 banking sector.

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Taken together, it’s striking how easy it is politically to be against large corporate entities in health care and otherwise, and pharmaceutical companies that are driving up costs.

There is a backlash brewing against health care.  Perhaps these are the seeds of that coming effort.