08/2003 Galen Report

Published August 1, 2003

The promise of a Medicare drug benefit has been transformed from a political football into a steamroller, and at least one thing is clear: The bill is based on bad policy.

Grassley and Baucus insisted patients on traditional Medicare must get a drug benefit equal to those joining the new market-based option. That violates President George W. Bush’s important principle–which the entire free-market policy community supports–that a new drug benefit should be a carrot to encourage seniors to join modern health plans that can provide better benefits.

Lawmakers made themselves insurance actuaries and wrote up the free-standing drug policy. Not surprisingly, it’s complicated and not at all senior-friendly.

Nonetheless, at least two private drug plans must agree to offer this coverage in each region of the country. If they don’t, the federal government would offer a fallback plan. This is straight from the Kennedy-Daschle playbook: a government-run drug benefit that’s run much like the rest of Medicare, with the federal government inevitably fixing prices and deciding what drugs will be covered.

Seniors hoping the new market-based plans will be an option should note they will be paid based upon the flawed fixed government payment system that has driven Medicare HMOs out of business and is forcing more and more doctors to refuse to see patients on traditional Medicare. The requirement that the government pick the “three lowest bidders” in a region turns health care into a bargain-basement commodity.

The Medicare director during the Clinton administration, Nancy-Ann DeParle, said if Bush signs this bill, “he will preside over the biggest expansion of government health benefits since the Great Society.” And she means this as a positive statement, encouraging Democrats to “speed the way” for the bill and fix its gaps later.

The Wall Street Journal observed Senator Ted Kennedy (D-Massachusetts) is supporting the bill because “we’ll expand it over a period of time.” The drug benefit is complicated and contains the dreaded doughnut hole, which liberals will try to fill–with more taxpayer dollars–as soon as they can.

Amazingly, the Washington Post editorialized against the proposal, calling it “a mishmash” and urging lawmakers to go “back to the drawing board.” There’s little chance of that.

As lawmakers proceed, they should be reminded of what happened the last time Congress passed a drug benefit for Medicare: in 1988, as part of the Catastrophic Health Care Act. The legislation was already on the books when seniors began to learn the details and they rebelled, beating with their umbrellas on the car of the measure’s author, Dan Rostenkowski. The legislation was repealed a year later. Please, no instant replays.

Grace-Marie Turner


Health Insurance Spending Growth: How Does Medicare Compare?
Joint Economic Committee
June 20, 2003

The Joint Economic Committee compares spending increases over 20 years for Medicare, the Federal Employees Health Benefits Program (FEHBP), and the California Public Employees’ Retirement System (CalPERS), as well as private health insurance and Medicaid.

The JEC finds the FEHBP’s cost control is slightly better than Medicare’s, even though the FEHBP offers more comprehensive coverage. FEHBP premiums grew at an average rate of 6.5 percent between 1983 and 2002, while Medicare’s average annual rate was 6.7 percent.

Full text (pdf): jec.senate.gov/JEC%20-%20Health%20Insurance%20Spending%20Growth.pdf

The GOP’s Medicare Surrender
Wall Street Journal
June 11, 2003

“What began as a worthy attempt by President Bush to reform the broken retiree health system is fast becoming in Congress little more than a giant new entitlement,” writes the Wall Street Journal in an editorial.

The GOP Senate bill may look like real reform, but a closer look finds bad ideas like competitive bidding that will limit choice. “Worse, these private providers would be reimbursed based on a traditional Medicare price benchmark–in other words, based on a price-control system that is already driving many doctors out of Medicare,” writes the Journal.

“The better reform alternative is to offer the drug benefit only as part of an integrated insurance plan just like most working Americans have,” writes the Journal. “And rather than picking winners, the government could let seniors choose for themselves.”

Full text (requires subscription): online.wsj.com/article/0,,SB105528903942968700,00.html?mod=opinion

Daschle Doesn’t Get it
Robert Moffit
National Review Online
June 11, 2003

Senator Tom Daschle fails to note “the average Medicare patient pays roughly $2,000 per year to cover the shortfalls” in coverage or to recognize “the crisis situations that have erupted in some cities because doctors refuse to take on new Medicare patients,” writes Bob Moffit of The Heritage Foundation.

There are signs all over the country Medicare is in trouble. In Denver, the share of doctors accepting Medicare patients is down 52 percent from 2001; in Seattle, the percentage has gone from 71 percent to 55 percent in four years. Moffit quotes Dr. Lois Copeland, a New Jersey physician, “who said she has lost two patients recently because doctors refused to operate.”

Medicare “doesn’t work for doctors or hospitals, which are fed up with its slow reimbursement, more than 111,000 pages of rules and paperwork, and a nearly indecipherable price-control system,” Moffit writes. “Increasingly, it doesn’t work for patients, who are finding it harder and harder to locate a doctor.”

Full text: www.nationalreview.com/comment/comment-moffit061103.asp

Dangerous Drug Plan
Robert Goldberg
Washington Times
June 11, 2003

“Prescription drug coverage for seniors is truly the Twilight Zone of American politics,” writes Robert Goldberg of the Manhattan Institute.

Current Medicare drug proposals “do not solve the problem of seniors who are truly unable to purchase a prescription because of cost, and they do not encourage seniors to obtain comprehensive coverage through health plans. The perfectly targeted policy for insuring access” would help lower-income seniors without coverage–and the cost would be far less than the $350 to $400 billion Congress is expected to spend on a Medicare drug benefit.

Full text: www.washtimes.com/op-ed/20030610-094627-5565r.htm

A Costly Freebie
Robert J. Samuelson
Washington Post
June 4, 2003

Adding a prescription drug benefit to Medicare “would simply worsen the country’s central budget problem: the huge retirement costs of the baby-boom generation,” says Robert Samuelson, a columnist for the Washington Post.

“From 2010 to 2030, the over-65 population is projected to rise by about 30 million; meanwhile, the working-age population (20-64) will increase by only 10 million,” compounding the pressure for younger families to pay for Social Security and Medicare benefits.

Samuelson says there are three reasons the costs of a drug benefit are dramatically understated: 1) costs will rise rapidly after baby boomers reach eligibility, starting in 2011; 2) today’s proposals cover half or less of the elderly’s drug costs and seniors will agitate for improvements; and 3) a new Medicare drug benefit will encourage more drug use.

Full text: www.washingtonpost.com/wp-dyn/articles/A10494-2003Jun3.html

Material for this report is provided by The Galen Institute, P.O. Box 19080, Alexandria, VA 22320. http://www.galen.org. Grace-Marie Turner is president. The report was produced by Elizabeth Lamirand, who can be reached at 703/299-9550, and edited by Conrad F. Meier, managing editor of Health Care News.