The American Interest
Analysis by Walter Russell Mead & Staff
Big Pharma and John Kerry Raid Medicare

The fiscal cliff bill didn’t just raise taxes; it showered half a billion dollars on a canny Big Pharma company that knows its way around Capitol Hill. A provision in the newly-passed fiscal cliff bill allows pharmaceutical giant Amgen to sell one of its pills (Sensipar) for two more years without having to negotiate a fair price with Medicare. Sensipar is an expensive pill, and the two year delay will cost Medicare upwards of $500 million. What makes this bit of corporate welfare even more egregious is the fact that Amgen recently pleaded guilty to an unrelated charge of major fraud. Nothing, it seems, is impossible for the politically connected:

Amgen has deep financial and political ties to lawmakers like Senate Minority Leader Mitch McConnell, Republican of Kentucky, and Senators Max Baucus, Democrat of Montana, and Orrin G. Hatch, Republican of Utah, who hold heavy sway over Medicare payment policy as the leaders of the Finance Committee.

Meanwhile, John Kerry found another way to raid the health care system. The Senator from Massachusetts did what diligent Senators do; he added a provision to the Affordable Care Act to allow his state’s hospitals to increase their Medicare reimbursements by a factor of ten:

Here’s how Massachusetts gets extra money: Hospitals in urban areas have to be paid at least the same amount as rural hospitals. Massachusetts only has one rural hospital—a 19-bed facility on Nantucket island. So, the Nantucket Cottage Hospital sets the floor for every hospital in the state.

But because Nantucket is so wealthy, its cost of living is high—and thus so are its Medicare payments. That drives up the payments for every other hospital in the state. And under Kerry’s provision in the Affordable Care Act, hospital payments come from a nationwide pool.

If the provision remains in place, Massachusetts’s payments will rise over the next decade from $367 million to about $3.5 billion. The pool operates on a zero-sum basis, so all the money the Bay State gets will be funded by cutbacks from other states.

These seemingly separate incidents both demonstrate a point we made about Obamacare last month. The damage doesn’t stop when a law like this is passed; special interest lobbies quickly go to work “helping” to write the regulations to implement the law, and in the years that follow they add nips and tucks in follow-on bills and regulations. By increasing federal control over the healthcare industry, Obamacare has made it easier for both private and public groups to capture rents and funnel taxpayer money into their coffers. Rot and corruption at the intersection of the health care industry and the political system are already destroying much of the good Obama’s health care experiment hoped to do, and the toll will only mount.

Published on January 21, 2013 5:45 pm