Les Jones

Health Care > Economics and Prescription Drug Benefits

Basic economics and common sense agree: when the price for a desirable item is reduced, demand is increased. So what happens when prescription drugs become free or nearly free to the people who use them? Right. Use increases.

That's the problem some of us have with a prescription drug benefit. Once the drugs become free, there's suddenly almost no limit on the demand, and thus no limit on the taxpayer's burden.

The theory is being proven empirically. Tennessee Governor Phil Bredesen requested an independent analysis of TennCare, Tennessee's healthcare plan for the uninsurable. The recently-released report found that the prescription drug benefit is responsible for the majority of the increase in TennCare costs (via SouthKnoxBubba):

The state provides more pharmacy benefits than most other states and smaller co-payments. Drug costs are projected to be responsible for 56 percent of the growth in TennCare total costs by 2008 under the mid-range scenario.

That's consistent with the experience in the United Kingdom, where prescription drug costs are soaring under nationalized health care:

His comments come days after it emerged that the NHS drugs bill has soared by nearly 50 per cent in three years, rising by £2.3bn a year to an annual cost to the taxpayer of £7.2bn.