Zeke Emanuel is tired of pay­ing for your expen­sive medicine.

Dr. Emanuel, who served in a senior posi­tion at the Office of Man­age­ment and Bud­get where he con­tributed to the recur­ring night­mare known as Oba­macare, recent­ly com­plained in the New York Times [“I Am Pay­ing For Your Expen­sive Med­i­cine”] that his insur­ance rates are high because the med­i­cines you’re tak­ing cost too much.

“We all need to care about not only our own health care bills but also those of our neigh­bors,” he writes.  And by car­ing about your neigh­bors’ bills, he means find­ing a way to avoid them.

What evi­dent­ly pro­voked Dr. Emanuel to fret about your med­ical bills was some­thing called a PCSK9 inhibitor, a recent­ly approved class of bio­log­ics that, accord­ing to a pre­lim­i­nary study, reduces the risk of heart attack and stroke by half.

If you are prone to car­dio­vas­cu­lar dis­ease, you might think this is good news.  Dr. Emanuel does not.  He cites press accounts indi­cat­ing that the med­i­cine will cost more than $14,000 per patient per year, though no insur­er or gov­ern­ment agency will pay that price because they nego­ti­ate discounts.

So why is Dr. Emanuel wor­ried?  He cites a recent New Eng­land Jour­nal of Med­i­cine arti­cle, which esti­mates that the drug might raise every­one’s insur­ance pre­mi­ums by $124 per year.  Despite uncer­tain­ty around that esti­mate, the new drug will be cost­ly and Dr. Emanuel clear­ly doesn’t think the ben­e­fit it could pro­duce for mil­lions of peo­ple is worth $124 to him.

His solu­tion goes beyond price con­trols.  They are, he writes, “a good start and nec­es­sary” but they “will not solve the sys­temic prob­lem of super-high drug costs.”  Instead of con­trol­ling prices, Dr. Emanuel wants to con­trol access.

He sings in what he calls “a grow­ing cho­rus” that wants to require insur­ance com­pa­nies and gov­ern­ment pro­grams to “pay for val­ue.”  Val­ue-based pur­chas­ing is not a cut­ting-edge idea.  It’s what you do every time you go to the super­mar­ket and decide whether to pay $13 for an organ­ic roast­ed chick­en or $5 for the non-organ­ic alter­na­tive.  “In the rest of the econ­o­my,” he writes, “we let indi­vid­u­als deter­mine val­ue.  They decide whether a new gad­get is worth the expense.”

But that won’t do in health care, Emanuel informs us.  Let­ting doc­tors and patients make med­ical deci­sions is a dan­ger­ous thing.  “It is not just patients’ per­spec­tives we need to take into account.  Patients get the ben­e­fit, but all of us are pay­ing the bill.”

Deci­sions about clin­i­cal val­ue should not be made in the clin­ic, Emanuel argues.  “Because we all pay, all Amer­i­cans have to have a voice in deter­min­ing value.”

By “all Amer­i­cans” he means gov­ern­ment, guid­ed by peo­ple of his aca­d­e­m­ic pedigree.

Dr. Emanuel offers a for­mu­la, bor­rowed from the U.K.’s Nation­al Health Ser­vice (NHS), for “deter­min­ing val­ue” and thus for decid­ing whether your med­i­cine, surgery or treat­ment is worth the price.  The NHS cal­cu­lates “Qual­i­ty-Adjust­ed Life Years” [QALY], a met­ric that takes into account both the quan­ti­ty and qual­i­ty of life gen­er­at­ed by med­i­cines and oth­er treatments.

“In Eng­land, they have a flex­i­ble tar­get,” he writes, “where­in above $45,000 per QALY require an increas­ing­ly strong case for cov­er­age.”  The PCSK9 inhibitor, as you may have guessed, miss­es the tar­get.  Indeed, Emanuel esti­mates that the bio­log­ics would cost “as much as $300,000 for every qual­i­ty-adjust­ed life-year they add.”

Eth­i­cal con­cerns aside (should gov­ern­ment deter­mine how much an addi­tion­al “qual­i­ty-adjust­ed life-year” is worth?), gov­ern­ment poli­cies have so dis­tort­ed med­ical prices as to ren­der sus­pect the sorts of cal­cu­la­tions Emanuel favors.  Before con­sid­er­ing whether to import England’s algo­rithm for deter­min­ing val­ue, pol­i­cy­mak­ers would do well to reflect on the wreck­age that pre­vi­ous gov­ern­ment for­ays into the health care mar­ket­place have wrought.

The gov­ern­ment, for exam­ple, impos­es price con­trols in the VA sys­tem.  It also oper­ates a Med­ic­aid “rebate” pro­gram, which requires drug mak­ers to mark down the price of med­i­cines in that bur­geon­ing pro­gram.  It man­dates that drug com­pa­nies make sim­i­lar price con­ces­sions to a grow­ing list of clin­ics and hos­pi­tals.  Man­u­fac­tur­ers also must slash prices by 50 per­cent for Medicare ben­e­fi­cia­ries who have fall­en into the drug benefit’s “donut hole.”

When the gov­ern­ment requires man­u­fac­tur­ers to pro­vide steep dis­counts to such a broad swath of the mar­ket, every­one else is pre­dictably charged high­er prices.

Then there are the lim­i­ta­tions gov­ern­ment enforces on the intel­lec­tu­al prop­er­ty rights of phar­ma­ceu­ti­cal com­pa­nies.  Dis­ney still holds exclu­sive rights to Mick­ey Mouse (intro­duced in 1928), but knock-off ver­sions of the drug Abil­i­fy (first approved to treat schiz­o­phre­nia in 2002), hit the shelves this year.  That means man­u­fac­tur­ers have to recoup all of the devel­op­ment costs of a prod­uct (and sus­tain ongo­ing research and devel­op­ment efforts) in a very short peri­od of time, putting fur­ther upward pres­sure on prices.

Emanuel doesn’t just over­look the dis­tort­ing effect gov­ern­ment actions have had on drug prices.  He also fails to see how gov­ern­ment has deformed health insur­ance mar­kets.  Fed­er­al pro­grams have long divorced pre­mi­ums from risk.  Oba­macare has extend­ed that prac­tice into the indi­vid­ual and small group mar­kets, cre­at­ing a pro­gram in which peo­ple who wait until they are sick to buy insur­ance pay the same rates as those who main­tained con­tin­u­ous cov­er­age when they were healthy.

It has thus made insur­ance a good deal for peo­ple who have pre-exist­ing med­ical con­di­tions and a bad deal for peo­ple who don’t.   That is a major rea­son why the vast major­i­ty of unin­sured peo­ple in rea­son­ably good health who don’t qual­i­fy for gov­ern­ment pre­mi­um and cost-shar­ing sub­si­dies have so far cho­sen to remain unin­sured.  It also helps explain how insur­ance com­pa­nies have man­aged to lose mon­ey under the pro­gram, even after pock­et­ing bil­lions in cor­po­rate wel­fare pay­ments.

The accre­tion of gov­ern­ment intru­sions into the health care mar­ket­place has dis­tort­ed med­ical prices beyond recog­ni­tion.  Good inten­tions have moti­vat­ed every inter­ven­tion, each of which has engen­dered a new round of prob­lems that, in turn, have inspired fur­ther well-mean­ing inter­ven­tions.  The result is a cost­ly and inef­fi­cient sys­tem where prices are unhinged from value.

Gov­ern­ment is bad at pay­ing for val­ue.  For con­sumers, it is a core com­pe­ten­cy.  Instead of smol­der­ing over oth­er people’s med­ical bills, Emanuel would do well to devote his con­sid­er­able intel­lect to scrap­ing away reg­u­la­to­ry bar­na­cles that pre­vent price dis­cov­ery.  Instead of more gov­ern­ment, we need a health care sys­tem that func­tions like the rest of the econ­o­my where, as Emanuel put it, “indi­vid­u­als deter­mine value.”

In a sys­tem like that, he wouldn’t have to wor­ry so much about oth­er people’s med­ical bills.

A sim­i­lar ver­sion of this post also appeared on the Galen Insti­tute web­site.