On Health Care, the GOP Needs a Supply-Side Approach with Better Messengers

D emocrats enjoy a 15-percentage-point trust advantage over Republicans on health-care policy among registered voters, according to a Morning Consult poll conducted in early October. It’s by far their strongest issue.

The fact that Democrats enjoy such a comfortable lead — despite the repeated failure of their policies to improve patient care — should serve as a wakeup call for conservatives. GOP politicians need to do a better job of convincing voters that government intrusion into the health-care marketplace worsens health, and that free-market reforms can improve and lengthen their lives.

That messaging overhaul should include better messengers. For too long, Republicans have put forward supposedly “conservative” politicians and health-policy experts who wind up supporting the Left’s government-centric healthcare agenda. If this continues, we might soon have a single-payer system in the United States as dysfunctional as those abroad. That would be the logical conclusion of current trends, which show that a rising percentage of the public relies on the government for health care. Such a tax-financed single-payer system entails a monopoly that can force customers to pay for its dismal services — would that sound like a good idea for any other American industry?

Despite the fact that the United States is heading in the wrong direction, Republicans who had campaigned for years on scrapping Obamacare suddenly got cold feet during the “repeal and replace” debacle in 2017. Five years later, few prominent Republicans still talk about repealing the law. But Obamacare’s pernicious effects have not ended.

All the while, more middle-class Americans have enrolled in Medicaid, which drains government accounts in exchange for generally lousy coverage that could be improved by competition. It’s of course a bipartisan goal to help the poor by providing health care, but that’s not what “Medicaid expansion” is about. Public resources could help the poor more effectively and at lower costs.

We’re seeing a similar lack of conservative pushback against Democrats’ recently-passed health-and-energy legislation dubbed the “Inflation Reduction Act.” Conservatives who’ve traditionally espoused the value of markets have been strangely silent. Some are even promoting the law. For example, Avik Roy of the Foundation for Research on Equal Opportunity and other analysts have praised the new law’s price controls on prescription medicines, despite these measures having been estimated to result in 135 fewer new drug approvals and the consequent loss of 331 million life years by 2039, according to our University of Chicago analysis. Innovation is most often the key source of health-care successes, with the latest example of course being the fight against Covid-19.

There’s nothing conservative about supporting price controls on anything — whether it be medicines in the 2020s or gasoline in the 1970s. Such controls are usually adopted with good intentions but should be judged on their actual results. Today, drug price controls are sold by both parties as a means of lowering health-care costs despite the fact that, in recent years, drugs have helped cut overall health-care spending growth. Increased spending on drugs often reduces spending on other forms of treatment by more. Statins, for example, reduce the need for heart surgery. The top cause of rising health-care costs is labor: wages for doctors, nurses, administrators, and the like account for the majority of total spending which is typical for most U.S. industries.

It’s especially tough to square some conservatives’ past support for market-oriented reforms with their defense of market-distorting incentives in the recent Inflation Reduction Act. The law doesn’t merely discourage research and development across the board — it gives federal bureaucrats the power to pick winners and losers in a way that conservatives abhor in just about any other context.

For example, the IRA allows the government to impose price controls on small-molecule drugs — which include most oral pills — once they’ve been on the market for nine years. By contrast, the law doesn’t target biologic drugs — which are manufactured from living organisms and usually administered intravenously — for price controls until they’ve been on the market for 13 years. Such disparate treatment all but guarantees that drug companies will steer capital towards new biologics while scaling back research into small-molecule drugs, for no obvious medical reason.

Artificially capping the price of brand-name drugs will also make it less lucrative for generic drugmakers to enter the market with lower-cost copies when brand-name patents expire. Thanks to a robust generics market, 95 percent of U.S. prescriptions are already filled with generic drugs, which are on average 80 to 85 percent cheaper than brand-name equivalents.

Markets that allow choice and competition work in every industry — and health care is no exception. Just consider the yawning gap between services such as LASIK and cosmetic surgery, which have decreased in inflation-adjusted prices over the past several decades, while the cost of virtually every other medical procedure and service has exploded. Elective cosmetic surgeries generally aren’t covered by insurance, which means that patients shop around on price and physicians must compete on quality. Market forces do not have to be abandoned simply because we want to help the poor afford care.

Bringing market forces to bear on other areas of the health sector — whether it be for health plans, medical products, or providers — would ultimately result in better, less expensive tax- or premium financed care. And doing so by expanding the supply of health care would promote competition, lower prices, and thus expand access. A “supply-side approach” to health-care policy is gravely missing, but not unheard of: many supply-oriented measures were laid out in a 2019 interagency report from the Departments of Health and Human Services, Treasury, and Labor.

Republicans should get behind such a supply-side health-care approach. They also need better messengers to explain in clear terms why markets, not Big Government, are the answer to our health-care woes. Most of the problems with U.S. health care, including constrained supply and high prices, are due to bad government policies that, if replaced with free-market approaches, would deliver better care at lower cost.