> Medicare is a big enough consumer that it should probably be running a program where it shares risk with generic makers
Perhaps, but Medicare has literally no incentive to do this.
It's one thing to posit that a monopsony or oligopsony could result in driving prices down. And in a closed system, that might be what happens[0].
But at the end of the day, Medicare has no mandate to ensure sustainability of reimbursement and payment rates. Since they can't raise revenues (taxes) without Congress, they balance the budget by driving reimbursements (for service providers) down below cost. Pharmaceutical companies are actually affected by this too, but because the big-ticket items are under monopoly protection (via drug patents), unlike care delivery, Medicare still has to pay sticker price for those.
The people who end up being hurt by this, by the way, are not Medicare patients, but uninsured patients and privately-insured patients.
[0] But not always - like a monopoly, a monopsony can choose price or quantity, but not both.
Medicare the-thing-run-by-Congress has incentive to do it. At least, in theory, as Congress should be looking to create regulations that are beneficial to taxpayers (Medicare isn't going away, therefore cost controls benefit taxpayers).
To the extent that I understand it, I agree that Medicare the-thing-run-by-statute doesn't currently have much incentive to do it.
I guess I could have said something about federal programs that run huge public health providers being structured to use market based policies to reduce costs, but I'm prone to colloquialisms (i.e., the pretense that Medicare isn't limited to existing statute, it can be amended to act differently).
> At least, in theory, as Congress should be looking to create regulations that are beneficial to taxpayers
In theory, theory and practice are the same. In practice, they aren't.
It's one thing to talk about structuring government programs so that they are obligated to serve the public interest no matter what. But actually implementing that, in a manner ensured to be robust against creeping scope, capture, and corruption, is damn-near impossible.
Perhaps, but Medicare has literally no incentive to do this.
It's one thing to posit that a monopsony or oligopsony could result in driving prices down. And in a closed system, that might be what happens[0].
But at the end of the day, Medicare has no mandate to ensure sustainability of reimbursement and payment rates. Since they can't raise revenues (taxes) without Congress, they balance the budget by driving reimbursements (for service providers) down below cost. Pharmaceutical companies are actually affected by this too, but because the big-ticket items are under monopoly protection (via drug patents), unlike care delivery, Medicare still has to pay sticker price for those.
The people who end up being hurt by this, by the way, are not Medicare patients, but uninsured patients and privately-insured patients.
[0] But not always - like a monopoly, a monopsony can choose price or quantity, but not both.