How to Fix the Medicare Mess

by Ben Peck

In These Times magazine, January 2004

The Medicare overhaul legislation that Congress passed just before Thanksgiving does too much to help special interests and too little for the seniors and people with disabilities who rely on Medicare for their health care.

If Congress had been designing this legislation with people in mind, it would have added a drug benefit to the original Medicare program and insisted that Medicare negotiate directly with the drug companies for low prices on their drugs.

Unfortunately Congress only considered human need after it addressed the demands of the drug industry, the insurance industry and those ideologically zealous Congressional leaders who would like Medicare, as older Americans have come to know and rely on it, to wither on the vine.

First, Congressional leaders ensured that the legislation did not offend the drug companies-major patrons of both major political parties, but overwhelmingly generous donors to the Republican party.

The drug companies' primary concern is protection of the high prices they charge in the United States. Dutifully, Congress included a provision in the legislation prohibiting Medicare from using the market power of its 41 million members to negotiate lower prices The cost of that provision: $139 billion in additional profits to the drug industry over eight years.

Next, the legislation had to appease the ideologues who insist that private health insurance plans be given a greater role in the Medicare program. Since private plans have recently been leaving the Medicare program in droves, the only way to lure them back was to pay them-big time. The 10-year cost of luring private plans back into Medicare: $12 billion in new subsidies on top of $67 billion in existing subsidies. Somehow we have a Congress saying that we save money by paying for profit insurers about 25 percent more than original Medicare to provide coverage.

The ideologues argue that people with Medicare need more opportunity to enroll in private plans and that private plans will be a powerful new tool to control the costs of the program. They believe both of these claims in the face of overwhelming evidence to the contrary.

Dollars directed to drug companies or private insurance companies are dollars drained from health benefits, including coverage of prescription drugs, for people with Medicare.

After the second round of tax cuts enacted earlier this year, White House funding for a Medicare drug benefit already was too little to provide comprehensive coverage. But after Congress attended to the interests of the drug and insurance industries, there was even less. The result is a drug benefit that many will find meager.

For most of the 41 million people with Medicare, the benefit would cut off once a person's total drug costs reach $2,250 and would not start again until their drug costs hit $5,100. That means that many people who depend on prescription drugs to control their blood pressure, cholesterol, diabetes or a host of other medical needs will be unable to afford their medicine come July or August. For some, the erratic nature of the benefit may be more dangerous than no coverage.

What is more, the benefit gets much worse as drug prices rise in the future. In 2013, the eighth year of the program, those with the largest drug costs would be responsible for approximately $5,000 in drug costs. The legislation will be a huge step backward for millions of people with better coverage from their employers who will drop that coverage as a result of the passage of this legislation. For the poorest of the poor, the legislation offers worse coverage than they currently enjoy from their states' Medicaid programs.

However, for some, the legislation does offer real benefit. The near poor would enjoy enhanced benefits and once people's total drug costs reach $5,100 the legislation offers generous coverage, paying 95 percent of costs. However, even the coverage for the low-income is limited by an assets test, which would mean that half of those eligible would not get the benefit because they would not be able to surmount the bureaucratic barriers to coverage.

The willingness of zealots to attack the program's fundamental character represents a relatively new development in Medicare, which enjoyed broad bipartisan support for most of its first three decades. This changed in 1994, when Newt Gingrich and other ideologically driven crusaders came to power in Congress.

Voters now need to hold the members of Congress who passed this bill accountable. They need to vote them out of office in 2004 and send back to Washington a Congress that will fix this mess.

A new Congress should start by passing legislation that focuses on the needs of people with Medicare. The government should be given not just the power, but the mandate, to negotiate directly with the drug companies for lower prices.

Congress should enact legislation imposing prescription pricing parity with Canada. U.S. citizens should not pay double the prices for life saving medicines that citizens in Canada and the rest of the industrialized world pay.

Message to Congress: take away the Christmas gifts for the drug and insurance industries and, for once, make the health of older and disabled Americans the national priority it deserves to be.

Ben Peck is the Washington Policy Director at the Medicare Rights Center.

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