Rethinking Government’s Role in Healthcare Reform

It’s time to stop pretending that the same government which contributed to the mess can fix the healthcare system.

For many years, Americans have dealt with increasing healthcare costs, dwindling access, and a growing sense of frustration. Recently, various stakeholders, including some senators, the Federal Trade Commission, and certain states, have begun to point fingers at pharmacy benefit managers (PBMs). But before we jump to conclusions, let’s ask a crucial question: who really created this mess?

The answer is pretty clear—it’s not just about PBMs. The real issue began long ago in Washington, D.C.

Having studied the healthcare and economic landscape for decades, I can say with some confidence that central planning generally fails. Yet here we are once again. Federal regulators seem ready to pin the blame on private entities due to a system distorted over generations.

While PBMs aren’t perfect, casting them as the villains doesn’t make much sense. They appeared as a somewhat market-driven answer to a crisis the government helped create. Their operations exist within an intricate system twisted by decades of flawed policies, starting back with wage controls during World War II, which led to employer-sponsored insurance and a third-party payer model that detached patients from pricing decisions.

The results? We see layers of Medicaid, Medicare, and a host of obligations that have clear outcomes. The government’s role has confirmed that healthcare will likely never function like a true market again.

If you truly want to address these healthcare issues, a solid first step is to stop repeating the same policies that contributed to the problem initially.

It’s essential to recognize that PBMs didn’t create this system—they just exist within it. The establishment of Medicare Part D subsidized prescription drugs but failed to address the deeper issues. PBMs entered the fray to negotiate with manufacturers, manage drug formularies, advocate for generics, and tackle bloated costs, all while navigating an opaque drug market.

They haven’t caused the problem, but they certainly didn’t start the fire.

Interestingly, PBMs often outperform much of the broader healthcare system. A recent study by University of Chicago economist Casey Mulligan revealed that PBMs create a net annual value of $145 billion. They help lower drug prices, assist patients with adherence, reduce hospitalization rates, and lower non-drug health costs by about $40 billion annually. They also encourage drug innovation and help to ensure timely access to new therapies, contributing an additional $13 billion each year to future drug development.

In contrast, government healthcare programs like Medicaid and Medicare waste hundreds of millions due to improper payments, inefficient management, and price manipulation. While Mulligan doesn’t quantify this waste, other studies estimate that government inefficiencies likely cost over $1 trillion annually.

Yet, no one seems to discuss this. Instead, we have the FTC publicly denouncing PBMs for pricing issues that government oversight has failed to manage.

The core issue in Washington? The persistent design of healthcare systems around bureaucratic processes rather than patients’ needs. The problem isn’t PBMs; it’s the bureaucracy itself. Real solutions should aim to restore autonomy and accountability to both patients and providers instead of looking for scapegoats.

That’s why establishing unlimited health savings accounts is critical, particularly for low-income individuals reliant on Medicaid. Instead of micromanaging their healthcare, we should empower them. This can be paired with smart work requirements for capable Medicaid recipients, promoting responsibility while still meeting genuine needs.

The result? More informed choices, increased competition, lowered costs, and a decrease in unnecessary intermediaries—all of which start by addressing the missteps made by federal regulators and compliance officers.

In true market environments, PBMs face the ultimate test: if they succeed, they thrive; if not, they dissolve. That’s market discipline in action. Impressively, PBMs are now one of the few entities in healthcare that can genuinely drive results.

This criticism aimed at PBMs is less about improving healthcare and more about consolidating power. Regulators and politicians are seeking scapegoats for a broken system of their own making.

But let’s remember the facts: PBMs help to cut costs, enhance access, and stimulate innovation. Government programs claim to do the same but often achieve the opposite.

If you are really serious about reforming our healthcare system, the first step is to abandon the failed policies that broke it in the first place. We need to remove obligations, minimize bureaucracy, and hand the power back to patients and providers. Real reform isn’t dictated by Washington; it involves transparency, accountability, and the freedom to choose what’s best.