Why Mike Leavitt needs Dale Carnegie

Yawn.
It didn’t take the HHS Secretary Mike Leavitt long to start in with the tired rhetoric about the evils of government-run health care(free reg req). Leavitt does not want the Feds to negotiate drug prices. Heck, he doesn’t even want Congress to give the Feds the power to do so.
Why not? What’s the Secretary scared of?
According to him, it’s the old archenemy of all things good – government-run health care. While I too am a firm believer in the power of the free market, Leavitt’s logic falls apart upon even the most rudimentary exam.

Leavitt’s argument goes like this.
“In politics, most specific issues like this are a disguise for a larger difference,” Leavitt said, adding, “Government negotiation of drug prices does not work unless you have a program completely run by the government. Democrats say they want the government to negotiate prices. What they really want is government-run health care.” Leavitt said negotiations would destroy the structure of the drug benefit, which relies on competition between private drug plans. “I don’t believe I can do a better job than an efficient market,” he said, adding, “We are seeing large-scale negotiations with drug manufacturers, but they are conducted by private drug plans, not by the government. A robust marketplace with a lot of competitors has driven down prices. It’s the magic of the market. To assume that the government, in our genius, could improve on this belies the reality of a complex task.”
Besides Leavitt’s lack of confidence in his own department, political party and the political process itself, he’s wrong. Let’s take his statement apart.
Leavitt claims that negotiation of drug prices by the feds does not work unless the entire program is run by the feds. Why not? What’s the linkage? Why can’t HHS develop a drug program that competes with commercial offerings? And how does he know this if it has not been tried? Hospitals, doctors, medical supply companies, ambulances, and therapists all get paid by the government and by private insurers, and although that system may not work well, it has functioned for over 40 years.
Next, Leavitt raises the shibboleth of Harry and Louise, those TV personalities funded by the Health Insurance Ass’n of America (HIAA) who decried government run health care. Boy, he’s wrong here on so many levels. First, he’s playing politics. Second, he’s making assumptions not backed by any substantive data. How is it that allowing the Feds to negotiate drug prices means Democrats want government-run health care? Third, most Medicare beneficiaries like their coverage. Fourth, why can’t Medicare develop a program to compete with the private sector?
Finally (I really have to get to work sometime today) Leavitt says that government can’t negotiate as effectively as private industry. That is just plain flat out wrong.
Exhibit One – the Veteran’s Administration. The VA’s prices are way way less than those negotiated by any of the private Part D programs (for the top 20 drugs, the median difference between the lowest price negotiated by a Part D sponsor and the VA’s lowest price was 46%). Last I checked, the VA was a government institution.
Exhibit Two – the dual-eligibles who used to get their drugs thru governmental programs. Now these folks are all enrolled in Part D programs, and costs have increased. Before Part D, dual-eligibles got their drugs at the lowest possible price (that’s due to a laws that required manufacturers to give states their lowest price). After Part D, costs went up because plan sponsors could not get the same prices.
It’s disheartening that Leavitt has so little faith in his own abilities, and in the abilities of CMS.
Perhaps a little Dale Carnegie training is in order?
Or, perhaps CMS needs a leader who has a little more self-confidence, and a lot more understanding of the business of health care.