Score One for the Party of Lincoln

Let's give a small cheer this morning for the Party of Lincoln. Not the modern-day GOP, mind you. I'm referring to the Civil War-time Republican Party which passed the False Claims Act to prosecute manufacturers who were undermining the war effort by providing Union soldiers with shoddy blankets, shoes and muskets.

The Wall Street Journal reports this morning that state and federal prosecutors have over 150 pending cases, most of them brought under the False Claims Act, against drug manufacturers for allegedly ripping off Medicaid and Medicare programs. The common thread to all the cases is differential pricing: charging the government (read taxpayers) significantly higher prices than they charge customers who are smart enough to negotiate with the drug companies. The law requires that government programs get the best available price.

These cases expose the inanity of our disfunctional health care payment system. They also raise an early warning flag about the Medicare drug benefit, which goes into effect next year. The government has earmarked $720 billion over the next ten years to pay for seniors' drugs. Unless the government negotiates decent prices and aggressively monitors the marketplace to ensure it is getting the best available deal, this "subsidy" for seniors will be transformed via the magic of a dysfunctional market into a price support program for already overpriced medicines. CMS (the Center for Medicare and Medicaid Services), meet the Agriculture Department.

Last week, there was news reports about a broad coalition of Washington lobby groups, ranging from the liberal Families U.S.A. to major corporate lobbying groups like the Business Roundtable, getting together to push for incremental changes to deal with America's rapidly deteriorating health insurance system. Today's report should serve as a reminder to those groups that the window for slapping bandaids on this problem is closed. When it comes to a public good like health care, only a single payer system can, to use the jargon of the economists, efficiently allocate resources.