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Dean Baker | Scoring a Drug Fix    [

    Medicare Misery
    By Robert Kuttner
    The American Prospect

    Thursday 05 January 2006

The new Republican Medicare bill is about to kick in, and what it offers to seniors isn't pretty.

    The New Year brings with it Congressional mid-term elections. Here is an issue that should be a real political gift to the opposition party - the colossal Medicare drug-benefit mess.

    It was clear back in 2003, when the Bush administration rammed this bill through the Republican Congress, that the purpose was not to devise an affordable prescription drug program for seniors. Rather the administration wanted to help two friendly industries, the pharmaceutical companies and the HMO's; and to get bragging rights for the 2004 election that Bush had helped seniors. Few voters would grasp just how bad the law was, since its effective date was deliberately put off until 2006.

    Now, as the year of reckoning arrives, the true cynicism of Bush's program is becoming evident to each senior citizen (or adult child of senior citizen) who attempts to fathom what Bush and the industry lobbyists wrought.

    For starters, coverage is woefully inadequate. You pay a $250 deductible and then a 25 percent co-pay on the first $2,250 of drug benefits each year, plus roughly another $450 a year in premiums. So if your prescriptions cost $2,250 a year, or about $190 a month, for prescriptions, you pay $1,200 a year all told and the plan pays just $1050.

    That's pretty shabby. But then, the truly bizarre feature of the plan kicks in. Coverage simply disappears, until you have spent nearly $3,100 out of pocket. This is the infamous "hole in the donut." Coverage kicks in again only after a total of $5,100 in prescription costs.

    A great many seniors will never get the coverage because the plan is a bad bargain, and they just won't sign up. Of if they do sign up, they will run out of the ability to pay enough out of pocket before qualifying for needed benefits. Even with these disgracefully skimpy benefits, the plan is expected to add over half a trillion to the federal budget over the next decade.

    Why would anyone have designed such an insane program?

    Because the political purpose was never to deliver good benefits. One administration goal, running the program through the private insurance industry, conflicted with the imperative of a clear, cost-effective plan. Seniors must evaluate innumerable competing private plans, each with subtle differences in costs and benefits that make an impenetrable program even less fathomable, and raise total costs because each of these private plans tacks on a profit. This was a case of privatizing something done far more efficiently through a direct government program.

    The second administration goal, fattening the drug industry, led to a provision explicitly prohibiting the government from negotiating bulk price discounts from drug companies, as the Veterans hospitals do. As a result, according to a study by Families USA, drug prices obtained by the VA are about 48 percent less on average than those expected to be charged to people enrolled in the Medicare drug program. Among the twenty most widely prescribed drugs for seniors, for instance, a year's supply of Protonix (for ulcers) costs the VA $253, but the seniors in the Bush Medicare program, which prohibits such bulk discounts, pay a sticker price of $1,080. That by itself will give you ulcers! A year of Zocor, the cholesterol-reducing drug, costs the VA $251. Seniors in Bush's drug plan get whacked for $1,323.

    It was these inflated costs that necessitated some gimmick to keep down the overall cost to taxpayers. Hence the notorious donut hole.

    If the Democrats have the moxie and the wit, they should propose a straightforward fix, take it to the country in the 2006 elections, and dare Republicans to oppose it:

    First, get rid of the costly crazy-quilt of private programs and bring the "Medicare" drug program back into public Medicare.

    Second, allow Medicare to negotiate bulk discounts the way the VA does.

    Third, get rid of the donut hole, and design a simplified benefit structure with modest co-pays and then 100 percent coverage after a set annual cap on out-of-pocket costs.

    Finally, if the savings from the bulk price discounts are not quite sufficient to cover costs of filling in the donut hole, take back a little of Bush's tax cuts to the richest one percent.

    This debate will also remind voters of a useful meta-lesson. A party whose mantra is "hate government," and that sees government mainly as a vehicle for rewarding special-interest allies rather than serving ordinary citizens, can never be trusted to run government competently.

    A happier New Year to all.

    Go to Original

    Scoring a Drug Fix
    By Dean Baker
    The Center for Economic and Policy Research

    Thursday 05 January 2006

    As we look at the national agenda for the new year, it's useful to consider where we stood at the beginning of 2005. At that time, President George W. Bush was garnering his forces for a frontal assault on Social Security. With the Republicans controlling both houses of Congress, many of the pundits predicted Bush would win. They didn't anticipate the sort of grassroots efforts that rose up to counter Bush's campaign. Thanks to the hard work of tens of thousands of activists across the country, the Democrats in Congress held firm in supporting Social Security, and before long, many Republicans were running away from Bush's plan.

    This victory deserves to be properly celebrated - and then we must move forward. The defense of Social Security was an essential goal-line stand in support of the nation's most important social program. But Social Security is a great success story that has benefited tens of millions of workers and their families. It never should have been on the chopping block in the first place. It was the strength of the conservative movement, and the weakness of progressives, that forced a fight over a program that we won 70 years ago.

    Having won the battle on Social Security, we now have a great opportunity to start moving forward in the drive for a real Medicare prescription drug benefit. The prescription drug benefit passed by the Republicans in 2003 was a cruel joke, whose main purpose was to enhance the profits of the pharmaceutical and insurance industries. Seniors are now learning this the hard way when they go to sign up for benefits. They are presented with a dizzying array of choices, as they are forced to decide between plans that provide good coverage on some drugs but not others, or high co-payments and low deductibles or the reverse.

    As has been widely reported, the plan is leading to anger and frustration. Seniors, many of whom have poor eyesight and are not accustomed to working with computers, have struggled to sift through the maze. In many cases they have relied on help from their children, who frequently have problems understanding the options themselves. Unfortunately, the complexity doesn't help the government either. The bill for the benefit will still cost the government more than $900 billion over the next decade.

    It didn't have to be this way. The dirty secret in this story is that drugs are cheap. They only get expensive when the government gives drug companies patent monopolies that allow them to sell drugs without competition. They get more expensive when the government creates a convoluted benefit scheme in which seniors buy their drugs through private insurers.

    The logical way to design a prescription drug benefit is to have Medicare negotiate the price directly with the drug companies. This method has brought price reductions of 40 percent or more at the Veterans Administration and in other rich countries. These savings would allow seniors to have a simple low-cost prescription drug benefit. Rep. Jan Schakowsky, D-IL, has proposed a bill that sets up a system along these lines.

    In addition to creating a real drug benefit for seniors, the Schakowsky bill is an essential step in reaching universal health care coverage. Why? As the most efficient part of the nation's health care system, expanding Medicare would be the most obvious way to reach universal coverage. However, no one would want to be in a Medicare system that doesn't have a workable prescription drug benefit. For this reason, we must first reform the prescription drug benefit before we can expect the public to take "Medicare for All" seriously. If the forces that turned back the Republican assault on Social Security turn their attention to pushing for a real Medicare drug benefit, they will both be advancing the cause of providing more security for seniors and advancing the cause of universal health care.

    The Campaign for America's Future, the group that spearheaded the defense of Social Security, is already moving forward on this issue. If rest of the coalition that defended Social Security joins in, there is real hope of success.

    The fact that 2006 is an election year improves these odds. Angry seniors struggling with a complex drug plan that provides limited protection will not be anxious to thank the Republicans on Election Day. And seniors always vote in disproportionate numbers in off-year elections. While this Congress may not reverse itself and approve a real Medicare prescription drug benefit, if the coalition that saved Social Security takes up this cause, it is likely that the next Congress will.