Controlling drug costs through Medicare's allowable charges
The Boston Globe
3/21/2003
Editorial
The Medicare cure
The Bush administration is so eager to shift Medicare recipients into HMOs that one might assume private insurers have a better record than Medicare at curbing the growth in health costs. In fact, neither the government insurance program for the elderly nor the private sector has excelled at holding down costs, but a recent report found that Medicare does a substantially better job than the insurers.
(Also)... a 2002 study... found that Medicare beneficiaries are generally more satisfied with their health care than are privately insured people under age 65.
So the question remains: Why would the Bush administration be encouraging Medicare recipients to join HMOs by offering them better prescription-drug benefits than they would get under a plan for those who stay in Medicare?
The answer is that the administration knows there is great popular pressure to add a prescription drug benefit to Medicare. If this were done through the traditional Medicare program, it would give government enormous buying power to drive down drug prices with the pharmaceutical companies. Splitting off Medicare recipients into smaller HMOs addresses one of the drug industry's great fears: that a single agency with the power of the entire Medicare population would be able to force down the exorbitant prices now charged for many essential medicines.
A healthy pharmaceutical industry is crucial to progress in developing life-saving drugs. But at a time when hospitals, doctors, and Medicare recipients themselves have had to make sacrifices, the drug industry should do its part, too. The Health Affairs report makes a strong argument for putting a drug benefit right where it belongs, in Medicare, with its superior record of controlling costs and satisfying its beneficiaries.
http://www.boston.com/dailyglobe2/080/editorials/The_Medicare_cure+.shtml
Comment: The primary goal of the Bush administration is to reduce public (tax) funding of the Medicare program. Strengthening Medicare with a bona fide prescription benefit would complicate that task because public support of our program of social insurance would be even greater. But the Bush administration also supports policies that greatly benefit their friends in the insurance and pharmaceutical industries.
The Boston Globe is quite correct with its comments on this one aspect of the complex Medicare issue. All other providers of health care services to Medicare beneficiaries must comply with the restrictions that the program places on allowable charges - charges that attempt to be both fair to the providers and fair to the taxpayers. Since pharmaceuticals have become a greater component of health services, it has become imperative that this industry also comply with the same standards of fairness. By making pharmaceuticals a full benefit of Medicare, the government will be in a position to set allowable charges, based on fairness to all.