Bush Sends Mixed Signals

Published March 1, 2003

In his State of the Union Address on January 28, President George W. Bush mentioned a prescription drug benefit and the need to get affordable drugs to AIDS patients in other countries. Both are important matters, and the President addressed them with his usual candor and common sense.

However, Bush implied that a prescription drug benefit has to be enormously expensive (though less expensive than Democrats want). And his comments on the AIDS problem seemed to assume the price system isn’t working to give AIDS patients access to needed drugs, justifying drug pirating by countries such as India. Neither of these assumptions is correct.

Prescription Drug Benefits

The President made it clear he supports a private and flexible drug benefit, not one that is government-controlled and inflexible, and that the benefit must be part of Medicare reform. This is good. Reforming Medicare will be the biggest battle over health care in our generation. Bush is courageously addressing the need to reform a program that has been failing seniors for years, but was too politically sensitive for other politicians to address.

Medicare has to change to include prescription drug coverage because the role of drugs in medicine has grown since Medicare was created in 1965. A system of insurance that covers surgery but not medication leads to higher spending, more pain and suffering, and more time lost for recovery and rehabilitation. It cheats seniors of the benefits of today’s life-saving and life-extending wonder drugs.

Medicare also must move in the direction of markets, property rights, personal responsibility, and choice. This is the direction the whole world is moving. Domestically, we have seen it in deregulation, welfare reform, and privatization. Internationally, we see it in the fall of the Berlin Wall, collapse of the Soviet Union, and spread of free trade and free markets to countries such as China.

Medicare is increasingly an anachronism in the U.S., an island of socialism and government monopoly surrounded by free enterprise, innovation, and consumer choice. That cannot continue.

Bush’s comments are encouraging, but there is also a risk. His pilot program for Medicare reform, announced late last year (and reported in the November 2002 issue of Health Care News) avoids government controls, open-ended entitlements, and price controls … but takes the muddy middle of the road in advocating more reliance on HMOs and PPOs to cover seniors. This may not be the right model.

Managed care helped control spending for several years, but it produced a backlash from patients upset over the loss of control and growth of expensive bureaucracy. Providers, too, have rebelled, and by organizing themselves they have managed to undo much of the early savings.

Better approaches are tax credits for insurance, association health plans, expanded Medical Savings Accounts, and repealing expensive mandates, community rating requirements, and other cost-raising and access-reducing regulations.

By advocating a prescription drug benefit delivered by PPOs and other types of managed care, the President may play into the hands of Senators Hillary Clinton (D-New York) and Edward M. Kennedy (D-Massachusetts), and other advocates of single-payer health care.

They will attack and seek to demonize anything short of open-ended government-guaranteed entitlements. Once prominent advocates of HMOs, they will now attack Bush for “forcing people into HMOs” in order to get prescription drug coverage. They will call for price controls and more subsidies, regardless of what the President offers.

Although Clinton, Kennedy, et al. may want to frame the debate as a replay of the 1993 fight over Hillarycare, Bush should not allow them to do so. Hillarycare is dead because it was a backward-looking reform, out of sync with the national and world movement toward markets, innovation, and consumer choice. It was a big-government solution from an administration that would later admit “the end of the era of big government” has arrived.

Dealing with AIDS

Bush surprised many listeners by devoting part of his State of the Union address to the problem of AIDS in developing countries. He called for spending $15 billion over the next five years and new international efforts to make AIDS drugs less expensive and more available in poor countries.

The President’s compassion is commendable, but once again the path he suggested is questionable.

There is good evidence that actions by India and other developing countries that undermine patent protection have already slowed the development and commercialization of new drugs to treat AIDS. Moreover, the cost of drugs is not the principal reason why the impoverished people of Africa lack treatment. More important are the absence of hospitals, care givers, and the rest of the public health infrastructure needed to deliver treatment. Many more lives would be saved if funds were invested in these essential services and facilities, than in buying expensive AIDS medications. It’s a tough choice, but it’s a choice that must be made in a world of limited resources and overwhelming needs.

The President needs to take a firm stand for patent protection and against pirating, even in the tough case of AIDS drugs.

The President should focus his attention, both in the Medicare arena and AIDS, on allowing people to choose and private companies to innovate and compete.

Solutions usually are to be found in lower taxes, less regulation, and protection of property rights (including patent protection), not in new bureaucracies, new entitlements, or more regulations. So long as the President keeps this in mind, he and his political party will be on the right track on health care issues.

Joseph L. Bast is president of The Heartland Institute.