PNHP

The Real Drug War

The Real Drug War

December 3, 2003 The Real Drug War: Against the Sick Profit Margins and Mortality Rates

By JOANNE MARINER

Here are some numbers to consider: 14 million, 35.9 billion, and one. The first is an estimate of the number of people who will die of AIDS and other treatable diseases over the course of the coming year, most of them in the poor countries of the developing world.

The second figure represents the combined 2002 profits, in dollars, of the ten biggest pharmaceutical companies listed in Fortune magazine’s annual review of America’s largest businesses. The third figure corresponds to the number of countries that, last week, voted against a U.N. resolution on access to drugs in global epidemics such as HIV/AIDS, tuberculosis and malaria. The resolution emphasized that the failure to deliver life-saving drugs to millions of people who are living with HIV/AIDS constitutes a global health emergency. 167 countries voted in favor of the resolution. The single vote against it was cast by the United States.

Sadly, these numbers are closely related. To protect their exorbitant profits, drug companies are fighting the production and distribution of cheap generic versions of patented drugs. Unable to afford the medicines that could save their lives, millions of poor people around the world die of treatable illnesses every year.
And, as the recent U.N. vote exemplifies, the drug companies have a reliable ally. Not only does the U.S. government use its considerable economic power to bully developing countries into restricting access to low-cost generics, it continues to try to change the international rules that allow such generics to be made in the first place.

Unnecessary Deaths,.
In their vulnerability to treatable diseases, the rich and the poor live in different worlds. Every year, millions of people in developing countries die of illnesses that they would likely have survived had they lived in Europe or the United States. A key factor in the enormous global disparities in death rates is poor people’s lack of access to needed drugs.

Consider the case of HIV/AIDS. An estimated 42 million people are living with HIV/AIDS worldwide, 39 million of them in the developing world. India alone has at least 4.5 million people who are HIV-positive, and possibly many more.
In the United States and other rich countries, since the advent of anti-retroviral drug treatment, AIDS has become a manageable disease, not a death sentence. But for the millions living with HIV in the developing world, prospects for effective treatment remain dim.

At present, only a tiny minority of HIV-positive people in poor countries have access to anti-retroviral drugs. For the others, as well as some marginalized populations in rich countries, the cost of treatment remains prohibitively high.
Patent Protections and Profits Nothing in the ingredients of anti-retroviral drug treatment makes it inherently expensive. Indeed, when a combination of generic drugs is used, treatment costs are about $600 per patient per year. But companies that profit from drug sales have an interest in keeping drug costs artificially high. In the United States, the cost of anti-retroviral drugs is generally in the range of $10,000 to $15,000 per patient annually, and people with advanced cases of AIDS may pay far more. Relying on international patent protections, drug companies have been trying to maintain drug prices high globally by restricting the production and distribution of low-cost generic substitutes.

Global patent protections are tied to global rules on trade, specifically, the rules of the World Trade Organization. Although the WTO’s strict intellectual property rules carve out exceptions for national health emergencies, they still go a long way toward limiting poor people’s access to life-saving medicines. And as Oxfam has shown in a paper titled “Patent Injustice,” the problem extends beyond HIV/AIDS. Brand name drugs for a number of major diseases cost several times more than their generic equivalents. The increasing drug resistance of endemic diseases such as tuberculosis and malaria — and the resulting need for access to new drugs — mean that the WTO’s monopolistic pricing rules threaten many millions of the world’s poor.

The Brazil Model
Despite the WTO’s restrictions, some developing countries have made important steps in meeting their peoples’ drug treatment needs. In Brazil, notably, extensive prevention efforts combined with state-funded anti-retroviral treatment have reduced AIDS-related deaths by more than half since 1996. The cornerstone of Brazil’s treatment program has been the local production of generic equivalents of brand name anti-retroviral drugs, which has driven down the cost of treatment enormously.

But Brazil’s successes, and those of countries like it, have been hard fought. TheWTO rules have been a battleground on which Brazil and others have fought a series of high-stakes skirmishes with drug companies. Backed by one of the world’s richest and most politically influential industrial lobbies, the drug companies have enlisted the U.S. government as a loyal ally in the campaign against generics. Through the office of the U.S. Trade Representative, the United States has fought to advance the interests of the pharmaceutical industry, pressuring other governments on a bilateral basis and threatening to seek trade sanctions via the WTO.

The U.S. vote last Wednesday in the Third Committee of the U.N. General Assembly was not too surprising, given this record. Still, it was dismaying to find the United States willing to stand alone against 167 other countries — as if it were a matter of principle to vote against a resolution calling for widespread public access to the drugs necessary to combat global epidemics such as HIV/AIDS, tuberculosis and malaria.

Future Trade Agreements

The U.N. vote is, moreover, a worrisome portent for the future. At present, the U.S. Trade Representative is negotiating a number of bilateral and multilateral trade agreements, including the proposed Free Trade Area of the Americas. Given U.S. advocacy on behalf of pharmaceutical companies’ interests, these agreements are likely to go beyond the WTO’s rules in protecting drug patents.
President George Bush, in a number of his most high-profile speeches, has expressed a rhetorical determination to assist in the global fight against HIV/AIDS. By allowing U.S. officials to lead the world in protecting the commercial interests of drug companies, he betrays his public commitment to this cause.
Joanne Mariner is a New York-based human rights lawyer. She can be reached at: mariner@counterpunch.org

Gingrich praises HSAs. Watch out!

The Atlanta Journal-Constitution
11/30/03
Condition of health care system has been upgraded
By Newt Gingrich

The historic Medicare and health savings account legislation that the House and Senate have passed, and which President Bush has promised to sign, is an extraordinarily important first step in the transformation of the American health and health care system that will save lives and money.

… the impact of this legislation extends far beyond the drug benefit. Through its creation of health savings accounts, the measure will begin to address the crisis in health care that affects all Americans.

If you are a fiscal conservative who cares about balancing the federal budget, the new legislation may have no more important feature than the health savings accounts. The new account will begin to move us away from the current model in which insurance companies dominate the health care transaction. Instead, the HSA will enable transactions between doctor and patient in which the patient controls how dollars are spent.

… the HSA represents the single most significant transformation that can be made in saving the country from skyrocketing health costs and steadily increasing calls for taxpayers to finance more and more of the health care system through higher taxes.

The next balanced budgets will only be possible once there is a transformation of the health system, and part of the key to this transformation will be the existence of health savings accounts. Without the first dollar interest in the payment of health expenses, there is little incentive on the part of the patient/consumer to scrutinize a doctor’s bill.

Health savings accounts will encourage individuals to shop for health plans that best fit their needs and to make cost-conscious decisions about how they spend their own health dollars as opposed to a third party’s money. Individuals who control their own health dollars will be wise purchasers of health services.

… all Americans will receive the opportunity to take control of their own health care spending so that they can provide better health for themselves and contribute to the better health of the economy.

http://www.ajc.com/opinion/content/opinion/1103/30newt.html

Comment: Laudatory comments about HSAs coming from Newt Gingrich should
alert us all to the intent of this isolated provision that was tacked onto the Medicare drug and “modernization” bill. HSAs are not about Medicare. Instead, they lay the foundation for a fundamental revision of the way we fund health care for all of us.

The individual accounts provide a tax “subsidy” for health care at the marginal tax rate which results in health care funding that is inversely proportional to income, the poor paying more for health care than the rich.

That alone should cause us to reject this model of health care “reform.” The
health policy literature is replete with other examples of the fundamental
flaws of these medical savings accounts.

Of perhaps greater concern is the flexibility that will be allowed in the design of the high-deductible plans. Although the plans would limit out-of-pocket expenses for families at $10,000, this does not include payments made for outside-of-network services. To keep premiums affordable, insurers will fail to provide adequate reimbursement increases for providers, limiting the numbers of providers who are willing to sign the contracts. Also, to provide options with lower premiums, insurers are deliberately diminishing the number of providers available thus saving costs by limiting access. Those families that purchase plans with affordable premiums will find that they do not have the protection of the $10,000 stop-loss limit when they are forced in urgent circumstances to accept available but non-contracted providers. A person with major trauma or an acute myocardial infarction cannot ever be an informed shopper of health care services. Those with high-cost, chronic problems may also find that restricted provider lists could significantly impair accessibility.

The claim that the catastrophic plans will take care of all costs after the HSAs are depleted is a fraud. The managed care PPO products will prove to be severely deficient for those with significant health care needs, but with modest or meager resources. Traditional indemnity catastrophic plans have almost disappeared already and, in the future, will surely not be an affordable option for the average-income individual.

Splitting the health insurance pool into millions of segregated accounts will adversely impact only those who have significant needs by depleting their accounts: the very individuals for whom insurance was designed. Providing catastrophic coverage by marketplace plans that compete on premium pricing (by reducing benefits and increasing cost-sharing) can only result in financial disaster and impaired health care access for the average individual with significant needs.

Title XII, authorizing HSAs, goes into affect one month from today. If it is
not repealed immediately, many of us will be left with the option of shopping for bankruptcy attorneys who will best meet our need to be relieved of a morass of medical bills. But after all, isn’t consumer-directed, personal bankruptcy the American way? Gingrich and friends apparently believe so.

The AARP Ads and the new medicare prescription drug law

On December 2, 2003, the AARP began running advertisements in national newspapers citing eight benefits of the final Medicare legislation that the President signed into law on December 8. The ad’s headline states that the ad contains “no sound bites… no spin…. no politics… just the facts.”

The following is an analysis of the ad’s claims.1 It should be noted that some of the problematic aspects of the legislation that relate to low-income Medicare beneficiaries and the premium support demonstration, which are described below, would have been more problematic without AARP’s use of its influence to soften the adverse effects of those provisions.

please click here to read the analysis of the ad’s claim

Stop the HSA Tsunami!!

Galen Institute
Consumer Choice Matters, #41
11/25/2003
HSA TSUNAMI
By Greg Scandlen

The new Health Savings Accounts (HSA) provision included in the Medicare bill just passed the Senate 54-44 and soon will be signed by the President. The new law will go into effect January 1, 2004. All 250 million non-elderly Americans will now have access to a Medical Savings Account, and one that is far more attractive than the Archer MSAs that were enacted in 1996.

Market analysis

* There will be a rush of banks, insurance companies and third-party administrators (TPAs) to develop products. The previous restrictions on
Archer MSAs have been removed. There is no longer a sunset provision,
there is no limit on employer size or total enrollment.

* All these development efforts will lead to far greater public awareness of the product.

* The individual market will convert to HSAs in droves.

* The small group market will be slower. Small employers are not benefits innovators.

* The fully-insured mid-market is a different story. Companies with 100
to 1,000 employees are more likely to have staff that concentrates on
benefits options and has the time to investigate new products. These companies
have been raising cost-sharing requirements anyway, so the prospect of
employee responsibility for funding part of the HSA is less of a stretch in this
segment.

* Self-insured large companies will likely stay with Health Reimbursement
Arrangements (HRAs). Companies that pay directly for the services consumed
are unlikely to be attracted to HSAs, which expect an up-front contribution
of money for all employees whether they are using services or not. HRAs
have the considerable advantage of not requiring pre-funding.

* The uninsured should find it easier to gain coverage. HSAs will be available to everybody – especially those workers whose employers provide no coverage at all, and who make up the vast majority of the uninsured.

Prospects

The market is ready for this. All of the discussion about consumer directed
health care in the last few years has sensitized corporate decision makers
to the advantage of putting more control in the hands of employees. HSAs
provide them with the perfect opportunity to do exactly that. The year 2004
will probably not see massive enrollment because vendors will need to
work on developing new products and marketing strategies. But by mid-year
there will be an enormous push to gain an early position in this new market
and become the recognized “industry leader.”

The timing couldn’t be better, with an improving economy and widespread
gains in the equities markets. Venture capital will be in great demand
to get the new products off the ground. Get ready for a twelve month race
to the finish line of 12/31/04 and the first-year enrollment numbers.

http://www.galen.org/ccbdocs.asp?docID=569

Comment: The Galen Institute… is a “free-market research organization”
that “was founded in 1995 by Grace-Marie Turner to promote a more
informed public debate over individual freedom, consumer choice, competition,
and diversity in the health sector” (Mission statement, Galen Institute).
Anyone following the health care reform debate recognizes the rhetoric of the
advocates of “consumer-directed,” “free market” health care. Galen has
strongly supported medical savings accounts (now health savings accounts, or
HSAs) as a tool to achieve consumer independence in the free marketplace.

What Galen fails to point out is that HSAs fragment the insurance pools. The
tax advantages accrue to the wealthy, and a tax-favored personal account
appeals to those who do not expect to have high health care bills. By removing the large sector of the healthier and wealthier from the traditional insurance risk pools, the higher-cost individuals remaining drive up premiums making traditional coverage unaffordable for those with the greatest health care needs. HSAs are both regressive tax policy, and cruel health policy which rations care by erecting financial barriers for those with the greatest needs.

For those of us who are healthy, HSAs with catastrophic coverage would serve our purposes well. But those of us who later develop significant disorders will discover why we should all have comprehensive coverage using a common risk pool. Many of us would decide in advance that we want that degree of security and would want to purchase traditional coverage. But we’ll find that traditional coverage will have left the market because of the death spiral of unaffordable premiums.

This fundamental flaw in dividing the risk pool into segregated accounts, favoring the wealthy while penalizing the sick, alone is enough to disqualify HSAs as a rational model of reform. But there are a great many other problems, only a few of which are listed here.

HSAs must be matched with high-deductible insurance. Insurers offer primarily managed care PPOs as the high deductible or “catastrophic” option. PPOs are undergoing transformation in order to keep their premiums affordable. They are using methods often lacking transparency to reduce benefits and increase out-of-pocket cost sharing. Tighter provider lists decrease choices. Greater penalties for using non-providers are now standard. Tiering rates for services shift costs to beneficiaries.

Individual PPO plans often exclude essential benefits such as obstetrical services. Deductibles have become the norm in PPO plans. The cost savings by using a high deductible plan theoretically funds the HSA. But, in fact, the savings now is usually so small that it could not be considered as a major source for HSA funding. When pricing different plans, you will find that the moderate deductibles have very little effect on the premium. Rather, the premium differences are due more to other factors such as the richness of the benefit package, other cost sharing measures, and the differences in competitive pricing in the various service areas.

In the individual market, most insurers will not sell plans to individuals with significant preexisting disorders, often for even simple problems such as allergic rhinitis. The uninsured will be able to access this market only if they have no current or expected needs for health care. Creating an insurance market for the healthy, and letting those with needs fend for themselves, is inhumane health policy at best.

A major flaw in our health care system is the profound administrative waste that diverts funds from patient care. HSAs add a very significant administrative layer and interject more middlemen into the process. Insurers sell administrative services, and HSAs will expand their market. Not only will insurers be involved but bank trustees, third party administrators, various investment managers, and others will all be there quite willing to divert to themselves their unfair share of the health care dollar. And the providers of care will have added to their administrative burden the need to access millions of individual, segregated accounts as they seek compensation for their services, whether by direct billing to the account managers or by the necessity of providing documentation of qualified expenses.

Once the beneficiary is eligible for Medicare, funds may be withdrawn from
the HSAs for non-medical purposes without penalty. For those who remain
healthy, the HSA becomes the equivalent of an individual retirement account
(IRA). Much can be said about the inequitable, regressive tax subsidies of
IRAs, but that will not be discussed here. But it is clearly inappropriate to remove dollars from an equitable health care risk pool and grant them to wealthier individuals. Such regressive tax avoidance schemes certainly should have no place in our health care system.

This program requires that the deductible for the catastrophic coverage
be at lease $1000 for individuals and $2000 for families. Many already
have deductibles at this level or higher. Why should an administratively
cumbersome program be established for expenses that are already being
met by personal reserves? The tax advantages for most would not begin to
offset the extra expenses and nuisance of HSAs.

Again, the worst feature of HSAs is that they effectively shift costs to individuals with the greatest health care needs which will threaten affordability of care. More individuals will be forced into public programs, such as Medicaid, but only if eligible. Public programs targeted to those with greater needs will remain chronically underfunded, again further impairing access.

It is important to understand health savings accounts. They are explained in
Title XII of the Medicare Prescription Drug, Improvement, and Modernization
Act of 2003 (pages 660-678). The bill can be downloaded at:
http://www.house.gov/medicarerx/hr1-conflegtext.pdf

Although there are many other elements of the Medicare bill that are absolutely unacceptable, we have maybe a year or so to change them. But Title XII, which authorizes HSAs, must be repealed immediately because it becomes law in only one month. Once millions of HSAs are established, it will be almost impossible to reverse this program.

CONTACT YOUR REPRESENTATIVES AND SENATORS IMMEDIATELY AND DEMAND THE URGENT REPEAL OF TITLE XII OF THE MEDICARE ACT!

–__–__–

Message: 2
From: “Don McCanne”
To:
Date: Sat, 29 Nov 2003 18:11:11 -0800
Subject: qotd: Bob LeBow

Dear Don and Ida,

I am so sorry to inform you that our great friend Dr. Bob LeBow just
passed away today, at about 11:30. As his fellow warriors, I know you would
want to know and would want to tell the many other friends around the country.
His funeral will be tomorrow at 1:00 at the Relyea Funeral Home at 318 N.
Latah in Boise. We have lost a giant among men.

Ern

Erwin Teuber, Ph.D.
Executive Director
Terry Reilly Health Services
211 16th Avenue North
Nampa, ID 83653
e-mail: eteuber@trhs.org
website: http://www.trhs.org

In Bob's own words

The Idaho Statesman
November 30, 2003
Doctor who ‘walked the walk’ dies in Boise at 63

Dr. Bob LeBow, a tireless advocate for health-care reform who was severely injured in a 2002 bicycle accident, died Saturday in a Boise hospital.

LeBow, 63, spent more than 30 years working to provide medical services
to those who can least afford them.

LeBow’s accident came shortly after the publication of his book “Health Care Meltdown,” an indictment of a system that grants access to medical care
based on ability to pay.

A former president of Physicians for a National Health Program, LeBow
continued to campaign for health-care reform after his devastating injury.

In August, he spoke at a news conference in Philadelphia, advocating a
national health insurance program. With words that echo his lifelong passion and service, LeBow said, “It is time to put the patient first – not last – in the setting of priorities.”

http://www.idahostatesman.com/story.asp?ID=55031

Health Care Meltdown (Benefiting needy patients at Terry Reilly Health
Services):
http://www.trhs.org/bobsbook/

Comment: In Bob’s own words:

“The U.S. also is the only developed country where getting sick or injured can, and all too frequently does, lead to bankruptcy. …

“Our employer-based health insurance system is outmoded, illogical and needs to be replaced. Perverse incentives make our health care system a poor value for the amount we spend. Health care needs to return to an emphasis on health, not cost or profit. …”

http://www.idahostatesman.com/story.asp?I

In Bob’s own words

The Idaho Statesman
November 30, 2003
Doctor who ‘walked the walk’ dies in Boise at 63

Dr. Bob LeBow, a tireless advocate for health-care reform who was severely injured in a 2002 bicycle accident, died Saturday in a Boise hospital.

LeBow, 63, spent more than 30 years working to provide medical services
to those who can least afford them.

LeBow’s accident came shortly after the publication of his book “Health Care Meltdown,” an indictment of a system that grants access to medical care
based on ability to pay.

A former president of Physicians for a National Health Program, LeBow
continued to campaign for health-care reform after his devastating injury.

In August, he spoke at a news conference in Philadelphia, advocating a
national health insurance program. With words that echo his lifelong passion and service, LeBow said, “It is time to put the patient first – not last – in the setting of priorities.”

http://www.idahostatesman.com/story.asp?ID=55031

Health Care Meltdown (Benefiting needy patients at Terry Reilly Health
Services):
http://www.trhs.org/bobsbook/

Comment: In Bob’s own words:

“The U.S. also is the only developed country where getting sick or injured can, and all too frequently does, lead to bankruptcy. …

“Our employer-based health insurance system is outmoded, illogical and needs to be replaced. Perverse incentives make our health care system a poor value for the amount we spend. Health care needs to return to an emphasis on health, not cost or profit. …”

http://www.idahostatesman.com/story.asp?I

Urgent need to repeal HSAs!

Los Angeles Times
November 27, 2003
Savings Accounts Key to Drug Law
By Vicki Kemper

… when Republican leaders were scrambling to attract or hold onto the votes of the most conservative members, their most powerful argument was reduced to a three-word mantra: health savings accounts.

… these unique tax shelters never had anything to do with Medicare or prescription drugs.

“It’s a double tax break,” said Gail Shearer, director of health policy analysis for Consumers Union. “Your money does not get taxed when you put in it; it does not get taxed when you pull it out. It’s an unprecedented tax shelter, especially for wealthy people, who are in a higher tax bracket.”

Shearer and other critics warn that the accounts will undermine the nation’s employer-based health-insurance system, leave additional low- and moderate-income workers unable to afford health insurance and further deplete the federal treasury.

“They will be attractive to the affluent and the healthy,” said Edwin Park, senior health policy analyst at the liberal Center for Budget and Policy Priorities. But he argued that premiums for conventional policies, which would be held by workers who are sicker and have higher medical expenses, could then skyrocket, leading some employers to stop offering such coverage.

“This is terrible policy on the tax, fiscal and health fronts,” he said.

http://www.latimes.com/news/nationworld/nation/la-na-savings27nov27,1,6319399.story?coll=la-headlines-nation

Comment: These medical savings accounts, renamed health savings accounts
(HSAs), have nothing to do with Medicare nor with the prescription benefit.
But they have everything to do with the efforts of conservatives to shift our private health coverage to “consumer-directed” models.

HSAs are much more tax policy than anything else. They allow tax-free contributions to personal, segregated funds for health care payments.
Those in higher tax brackets benefit whereas those with incomes below the
taxable threshold receive very little benefit. Thus this is a highly regressive tax policy, providing generous tax subsidies to the HSAs of the wealthy not available to the same extent to lower income individuals.

But the greatest concern is that HSAs will selectively attract those who do not believe that they will have to pay much out of their HSAs. Obviously, it is the healthier individuals, who happen to be the majority, that will be attracted to these plans. By concentrating those with higher health care needs into our traditional individual and employer-sponsored health plans, costs will go up. With increased costs, premiums will skyrocket. With this “death spiral” of premiums, traditional health insurance will become less and less affordable, and the numbers of uninsured will increase. Thus an extraneous program, HSAs, which has been included in the Medicare prescription bill, threatens the future integrity of the private health plans on which most of us depend.

Once a large number of these tax-preferred accounts have been established,
reversal of this program will be very difficult. It is essential that this provision of the Medicare bill be repealed immediately since it goes into effect January 1, 2004, only a month from now. That means that it must be the very first item of business when the members of Congress return! It is no coincidence that the conservatives made sure that this program would be up and running immediately as others begin to work on repealing sections that will not be in force for some years to come.

CONTACT YOUR SENATORS AND REPRESENTATIVES IMMEDIATELY TO DEMAND URGENT REPEAL OF THE HEALTH SAVINGS ACCOUNT SECTION OF THE MEDICARE PRESCRIPTION DRUG, IMPROVEMENT, AND MODERNIZATION ACT OF 2003!

(Because of the urgency, please circulate this message immediately to as
many concerned citizens as possible. HSAs will be a permanent fixture of our
health care system without an immediate groundswell of opposition.)

Back-scratching and arm-twisting win Medicare fight

Back-scratching and arm-twisting win Medicare fight

By William M. Welch
USA TODAY

GOP leadership plays every ace on Democrats — and own party members — to

secure passage

WASHINGTON — Exhausted from a yearlong struggle, Republican congressional leaders could see their hopes for delivering a prescription-drug benefit to seniors slipping from their grasp one evening two weeks ago in a basement room of the U.S. Capitol.

In a remarkable journey that few thought would be completed this year, the decisive moments for the overhaul of Medicare passed by Congress this week may have come that Wednesday and the day after. A key Republican negotiator walked out in anger, jeopardizing President Bush’s top legislative priority. ”It looked pretty grim,” Bush’s top negotiator, Health and Human Services Secretary Tommy Thompson, recalled later.

The talks ultimately yielded the most far-reaching changes in the health program for 40 million elderly and disabled Americans since its creation in 1965. To get there, Republicans alternately catered to conservatives, compromised to win over moderates and lured the nation’s most powerful seniors’ group to their side.

It was a victory that required the patience of a heart surgeon, the boldness of a former Madison Avenue executive and the raw political muscle of a former wrestling coach. It was built over pizza and pistachio nuts, sealed with billion-dollar giveaways and, ultimately, passed by making time stand still.

The debate really began six years ago. It was then, in a joint presidential-congressional study commission, that some of the players who ultimately wrote the legislation first joined two vexing issues: providing seniors a new drug benefit and restraining Medicare for the costly retirement of the baby boom generation.

”I’ve got six years invested in this,” said Sen. John Breaux, D-La., 59, who co-chaired that commission in 1997-98. He became one of only two Democrats allowed by Republicans to join the negotiations this fall. ”I wanted to get this done before I’m on Medicare.”

The debate resumed in January, when Bush set aside $400 billion over 10 years for the drug benefit. It was only one-fourth of what seniors would spend on medicine over that period, critics said. Still, it was a big commitment, especially while the federal government was borrowing record amounts.

But there was tension between Bush and Congress over how it would work. Administration health advisers worked on a proposal, and when it leaked, congressional Republicans were horrified. The administration’s idea was to offer the drug benefit only to seniors who agreed to join managed-care plans. On Capitol Hill, both parties saw that as coercion.

House Speaker Dennis Hastert, R-Ill., moved quickly to quash the plan. He rejected the idea in a meeting with hometown newspaper reporters and editors. By spring, Bush had sent Congress merely a list of goals. He would leave it to Republicans in the House of Representatives and Senate to flesh out the details.

Piling up pistachios
The gloom was measurable two weeks ago around the long oval table in the hideaway office of Rep. Bill Thomas, R-Calif., the headstrong chairman of the House Ways and Means Committee.

The headline issue, the one seniors were clamoring for, had been settled in that same room weeks earlier: a uniquely shaped benefit to assist Americans 65 and older with the costs of medicines. Yet the fight over seemingly tangential issues was proving intractable. They had divided conservatives from centrists over Medicare’s future: whether it would continue as a government program or be run by private insurers.

Though they sent out for pizzas when the talks dragged on, a constant presence was pistachios. The small salty nuts are a leading cash crop around Bakersfield, Calif., Thomas’ home. He kept silver bowls filled with white pistachios throughout the months of negotiations. By that November evening, the shells were piling up fast.

”When the going was really heavy and controversial, we ate more pistachios,” Thompson said. ”Thomas said we were now eating 4 pounds of pistachios per meeting. It was getting pretty frayed.”

The deadlock threatened the dreams of Bush, Senate Majority Leader Bill Frist, a heart surgeon, and Hastert, a former wrestling coach. They were united by a determination to turn the issue into a singular success that could reap rewards in 2004 and, perhaps, cement Republican majorities for years to come.

Thomas had become recognized as part of the problem. Smart but overbearing, the Ways and Means chairman is one of the few members of Congress who understands how Medicare works. But his abrupt, lecturing manner alienated even allies. His Senate counterpart, Finance Committee Chairman Chuck Grassley of Iowa, got so mad at one point that he withdrew his aides from meetings.

Thomas’ strength was his mastery of arcane details. Hours were spent with him instructing colleagues on the legislation’s fine points. On that November day, Thomas felt he had reason to stew. Frustrated by more than three months without a resolution, Hastert and Frist had taken over the talks. They had concluded Thomas was incapable of closing a deal.

”It was stalemate,” Frist, R-Tenn., recounted later. ”The speaker and I made a decision to come in.”

The final four
There were four issues left:

* Competition. Thomas and his conservative allies insisted that Medicare be forced to compete with private insurers by the end of the decade. Known as ”premium support” to health technocrats, it was a concept few members of Congress could explain. But its intent was clear: Medicare recipients would no longer be guaranteed health care at a fixed cost.

* Cost controls. Conservatives demanded strict limits on Medicare spending. They feared that the drug benefit’s cost would far outstrip the $400 billion Congress and the president were allocating from now to 2013.

* Tax-free savings accounts. As a price for their support, conservatives wanted to expand tax breaks for those who save to pay their own medical expenses.

* Employer benefits. Everyone was afraid that employers would stop offering more generous drug benefits to their retired workers. AARP, which represents 35 million Americans age 50 and up, wanted financial incentives for employers to keep covering retirees.

Frist and Hastert thought that if they could solve the competition issue, the others would fall into place. They worked out a proposal to test competition in a handful of cities and regions, starting in 2010. It was not enough for conservatives, too much for liberals, but just right for the emerging center.

Thomas, however, was not in the center. Furious at being eclipsed, he stalked out of the meeting. Some feared he would head for the airport and California. Hastert began cajoling him by phone and in person, reminding him of the consequences of failure.

By the next day, Thomas relented. Negotiators returned to his office and accepted what Hastert described as a ”demonstration” of competition. Frist and Hastert let Thomas shape the details to, in his words, ”make it workable.”

The leading liberal signs on Earlier in the year, Frist had begun meeting weekly with an unlikely partner, Sen. Edward Kennedy, D-Mass. Kennedy is the Senate’s leading liberal and a fierce defender of Medicare. But he’s also a legislator, rather than an ideologue. At 71, expanding Medicare represented a potential legacy.

The odd couple met in Kennedy’s hideaway office off a rarely traveled hallway on the Capitol’s third floor.

In June, Kennedy stunned colleagues when he and Frist cut a deal. Though some Democrats opposed it as inadequate, Kennedy’s backing brought enough Democrats to win relatively easy initial approval in the Senate.

In the House, Hastert prodded Thomas to bring his own Medicare bill through his committee. A far more conservative alternative, it won approval in the House by one vote. The table was set for the real bargaining to begin.

When the competing bills were sent to a House-Senate conference committee, Thomas refused to let House Democrats join in. Two Senate Democrats were allowed to attend: Breaux, a dealmaker, and Sen. Max Baucus, D-Mont., regarded as pliant by Republicans. Kennedy, whose support had delivered the Senate, was barred.

Thomas had a hard time forging agreement within his own party. Talks that began in August became intense in September and October. Much time was spent neutralizing potential opposition. Doctors won an increase in reimbursement rates, and the American Medical Association fell in line. Insurers, managed-care plans, home health care providers, hospitals and other groups all got provisions to boost their bottom line.

A key obstacle was winning — some said buying — rural legislators. For Grassley and Baucus, both from farm states, a top priority was higher payments for rural hospitals that feel shortchanged by Medicare payment rates. A $25 billion sweetener for rural health care was added; Grassley and Baucus announced it together in the Senate TV studio.

The ‘seal of approval’
With agreement on the long-range test of competition, the leaders worked through the weekend on the final obstacles. Political solutions emerged.

Instead of automatic Medicare cuts, they inserted a provision requiring Congress to consider action if spending targets were exceeded. It was a political fig leaf.

A trade solved two final issues. For conservatives, a $6 billion provision expanding health savings accounts was added, allowing people who buy high-deductible health insurance to put away up to $5,150 a year tax-free. In return, AARP won a provision giving employers $18 billion in subsidies to keep offering drug coverage.

With Kennedy cut out of the deal and threatening a filibuster, Frist needed to woo more Democrats. He had one ace left.

One of the first groups Frist had reached out to after taking the majority leader’s job in January was the AARP and its strategic-thinking CEO, Bill Novelli. He had met with AARP’s board of directors and legislative counsel in a private room at the Hotel Monaco, down the street from AARP’s headquarters. AARP’s leaders voiced frustration over years of delay and ideological distractions. In the months that followed, Frist called Novelli often.

By the decisive week in November, Frist was pressing for an endorsement. He phoned Novelli on Saturday, Nov. 15, to present the deal. The next day, Novelli convened a closed-door meeting of AARP’s board of directors, who flew in from around the country. This time they met at the Hyatt, several blocks from the group’s offices. The afternoon meeting stretched until 8 p.m.

Novelli wanted to throw support to the Republicans. A former advertising and marketing executive who cut his teeth on Richard Nixon’s 1972 re-election campaign, then made a fortune on Madison Avenue, Novelli claimed allegiance to neither party. He saw the endorsement as a dramatic move that would expand his group’s appeal to aging baby boomers.

When Novelli walked out of the room, he had agreement. Democrats were outraged. Protests flooded the group’s phone lines and e-mail. But Novelli didn’t flinch. In fact, he joined Frist and Hastert before TV cameras to announce the deal. Hastert called AARP’s support ”the Good Housekeeping seal of approval.”

Stopping the clock
With AARP on board, the outcome seemed assured. But there were still some surprises left.

House conservatives felt Hastert and Thomas had given up real cost restraints and limited the role of private insurers. Bush, wrapping up a trip to London, called conservatives in a bid to change minds. His top political aide, Karl Rove, phoned from Air Force One.

At 10 p.m. last Friday, about 20 conservatives met for dinner at Hunan Dynasty, near the Capitol, to escape the pressure. ”It felt a little like the Last Supper,” Rep. Mike Pence, R-Ind., said.

When the voting began around 2:30 a.m. Saturday, Pence took up a position on the back rail of the House. He was stunned as Hastert kept the 15-minute electronic vote open for nearly three hours, so GOP leaders could round up votes.

Two hours into the voting, one GOP leader told Pence that Hastert was ”out of aces.” The vote stood at 216 for, 218 against. Bush, now back in the White House, phoned conservatives in the predawn hours. GOP leaders warned of political catastrophe if the bill died.

Finally, Reps. Trent Franks of Arizona and Butch Otter of Idaho stepped forward to switch their votes, and a few other Republicans fell in line. The bill passed 220-215. The Senate followed suit three days later, 54-44.

Bush, Hastert, Frist and AARP could start planning their party.

AARP to Reap Huge Profits from Flawed Medicare Drug Bill

For Immediate Release on NOV 21st 2003
Contacts:
Quentin Young, MD (312) 782-6006
Johnathon Ross, MD (419) 536-3879
David Himmelstein MD, (617) 665-1032

AARP to Reap Huge Profits from Flawed Medicare Drug Bill

Seniors Group Makes $163 Million Annually on Insurance Sales

Statement by David U. Himmelstein, MD and Steffie Woolhandler, MD, MPH
Harvard Medical School and Physicians for a National Health Program

The American Association of Retired Persons (AARP) derives significant income from the sale of health and life insurance policies, and stands to make hundreds of millions more under the Medicare Prescription Drug bill now being debated before Congress. Yet the AARP’s financial interests in the bill have received scant attention.

The AARPs current insurance-related revenues come in several streams.

1- They receive royalties from AARP insurance policies marketed to their members by United Healthcare, MetLife and others. Last year these royalties amounted to $123.283 million.

2- They receive list access fees from insurance firms that market to their membership. In 2002, such fees totaled $10.794 million.

3- AARP receives Quality Control fees from insurers that amounted to $893,000 last year.

4- AARP also earns investment income on the premiums received from members until such premiums are forwarded to UnitedHealthcare and MetLife. In 2002, AARP earned $26.708 million in such investment income.

The table below summarizes the AARPs income for each of these categories over the past 4 years, as well as their total operating revenues, and the proportion of revenues accounted for by insurance-related items. All data are derived from the AARPs Consolidated Financial Statements. Dollar figures are given in millions.

Income from premiums InvestedInsurance-Related TotalTotal Operating Revenues Insurance-Related as % of Operating Revenues
Years 1999 2000 2001 2002
Insurance Royalties $111.3 $111.8 $115.5 $123.3
List Access Fees $8.6 $8.9 $9.3 $10.8
Quality Control Fee $0.7 $0.8 $0.7 $0.9
$4.7 $40.3 $33.1 $26.7
$125.2 $161.8 $158.6 $161.7
$412.2 $502.1 $520.0 $635.8
30.4% $32.2% $30.5% 25.4%

We believe the AARPs huge insurance business helps explain why it has endorsed a bill that threatens the future of Medicare and the health of America’s seniors. Under the proposed Medicare legislation the AARP would almost surely reap hundreds of millions of dollars in additional insurance revenues over the next decade. The Medicare bill would pump $400 billion in Federal Government money into new Medigap drug policies over the next decade. At present, the AARP’s profit from its huge insurance sales amounts to 3.9% of the insurance premiums it collects. If AARP’s partners were to capture even 10% of the new Medicare prescription drug coverage market, their premiums would amount $40 billion, and the AARPs profits would be $1.56 billion.

The Medicare prescription drug bill offers huge payoffs to the drug industry, private insurers, and some large employers. It would provide paltry benefits to Medicare recipients and take a giant step toward privatizing Medicare. In effect, the AARP leadership has shamefully agreed to sell out its members in exchange for the organization’s financial gain.

#####

Physicians for a National Health Program (PNHP) is a research and education organization with more than 12,000 physicians representing every state and specialty. PNHP was founded in 1987 and has physician spokespeople across the country. For a local spokesperson, call the national headquarters at 312-782-6006. Visit us online at www.pnhp.org

Seniors oppose current Medicare bill

AFL-CIO
News Release
Nov. 19, 2003
Poll: Seniors Oppose Medicare Bill in Congress

By an almost two-thirds majority, senior Americans say Congress and the White House should work for a better Medicare prescription drug plan than the one offered in a bill the House and Senate are set to vote on this week, according to a new nationwide survey. Only 19 percent of those polled say Congress should pass the current bill.

Peter D. Hart Research Associates conducted the poll of voters ages 55 years and older Nov. 18-19 for the AFLCIO after details of the bill-merged from earlier House and Senate-passed versions were released.

Respondents overwhelmingly view the drug plan unfavorably (65 percent to 26
percent)…

The poll also found 65 percent unfavorably view the bill’s increase in subsidies for private HMOs and move toward privatizing Medicare.

http://www.aflcio.org/issuespolitics/socialsecurity/medicarebasics/s11192003.cfm

Comment: Why are so many legislators supporting a bill that the people don’t want? And why don’t they craft a bill that the people do want? And why do we keep reelecting a non-responsive Congress?

Consumers Union: Drug benefit price is too high

Consumers Union
November 17, 2003

Medicare Prescription Drugs:
Conference Committee Agreement Asks Beneficiaries to Pay Too High a Price
For Modest Benefit
By Gail Shearer

Best features of the agreement:

* Provides meaningful prescription drug coverage for very low-income individuals with incomes below 150 percent of the federal poverty level, provided they can pass the bureaucratic hurdles and have very low assets.

* Provides prescription drug coverage through Medicare for those “dual eligibles” who are eligible for both Medicare and Medicaid (though many may face higher co-payments than they do now).

* Provides modest relief for the small percent of beneficiaries who have the highest (catastrophic) prescription drug needs (though they continue to face
high out-of-pocket costs).

* Provides some relief for beneficiaries who now have no prescription drug coverage, or have high-priced medigap drug coverage, but relief will be modest and many will still face very high out-of-pocket costs.

Worst features of the agreement:

* Uses a model (and even explicit language) that precludes deep discounts
for beneficiaries and assures that prescription drug expenditures will continue to spiral.

* The inadequate funding, failure to contain costs, and benefit design combine to mean that the benefit will be modest for most and skimpy for many; the benefit will not meet the public’s expectations for comprehensive coverage that is similar to what Members of Congress enjoy. Millions will face large out-of-pocket costs because of the large gap in coverage (the doughnut).

* Subjects about one quarter of Medicare beneficiaries in 2010 (possibly earlier) to pressure to leave traditional fee-for-service Medicare, where they have freedom to choose their own doctor, by forcing traditional Medicare to compete with private health plans that limit choice of doctor and can offer lower premiums because they cherry-pick the healthy.

(Private health plans’ reimbursement levels do not adequately reflect the better-than-average health status of their enrollees, boosting HMO profits.)

* Will create a crisis atmosphere in about 2010 when projections show that funding from general revenues will exceed (at a future date) 45 percent of
Medicare spending: likely to lead to cutbacks in Medicare benefits, increased cost-sharing, and increased reliance on relatively regressive financing sources.

* Creates a new tax shelter that will benefit the wealthy, to create health
savings accounts; unprecedented tax policy that will undermine the provision
of comprehensive policies by employers, drive up premiums for those who want
comprehensive coverage, and shift costs to people under 65 who have existing
health conditions.

* The model is premised on reliance on private insurance plans and private health plans to provide coverage, continuing the practice of over-paying private companies (by failing to take into account the lower costs of their enrollees), guaranteeing that special interests will come to Congress to lobby for more money (and threatening to cut back coverage otherwise).

* State governments will not be able to attain the prescription drug discounts achieved under Medicaid, since dual eligibles will be in Medicare.

* Millions of dual eligibles (including nursing home residents) will face higher copayments than they pay today, and these co-payments will increase over time.

* Variation of actual “benefits” because of secret and private formularies used by the pharmaceutical benefit managers (PBM’s). Lists of covered drugs will vary from plan to plan and from region to region. Selection of drugs for the formularies need not be based on scientific evidence, but can be based on secret deals that are hidden from the public and regulators. PBM’s will have no accountability to the public or government and their business dealings will lack transparency. Conflicts-of-interests will cost taxpayers billions of dollars.

* Weak “federal fallback” provision means that beneficiaries in an area that
lacks true private competition of drug-only plans (i.e., with just one drug-only plan and one “integrated plan”) will not be eligible for Medicare fallback coverage. No assurance that the premium for the drug-only plan will be anywhere near the $35/month estimate. In other words, if a region has one drug-only plan, charging $70 a month, and one preferred provider plan (PPO) that severely restricts one’s choice of doctor, there would be no federal fallback plan.

* The cutoff in eligibility for low-income subsidies is very low: an individual with income above $13,000 and a couple with income above $16,300 will be ineligible for the low-income subsidy (2002 federal poverty levels).

* Millions of people with comprehensive retiree drug coverage will lose this
coverage, and will end up with a Medicare policy that is much less comprehensive. (Retiree coverage is typically comprehensive, without a “doughnut” in coverage; the proposed benefit structure, which does not count
retiree plan payments toward the catastrophic level, is likely to lead many employers to drop their retiree coverage. The conference agreement’s additional subsidies for employers is unlikely to eliminate this problem.)

* May weaken the existing quality reporting standards for private health plans, hindering consumers’ ability to make informed decisions about private health plans and undermining the premise that choice of health plan is good for consumers.

* Results in continued profitability for the pharmaceutical industry (guaranteeing larger markets without governmental pressure to restrain prices) while asking nothing for the public good in return.

It is troubling indeed that the elements on the “best list” come with caveats that mean that the good things are not as good as they should be. It is nothing short of tragic that legislation that was meant to offer relief to Medicare beneficiaries comes laden down with so many provisions that will harm Medicare beneficiaries and even threaten Medicare’s long-term aviability.

Conclusion:

Medicare beneficiaries have waited for a long-time for relief from the financial burden of high prescription drug costs, and are desperate for some relief. When Congress set aside $400 billion (over ten years) to address the problem, we understood that whatever proposal emerged would be able to address only a fraction of the problem. Because the Conferees failed to adopt a plan that curbs prescription drug expenditures, and instead developed a model that relies on an insurance industry eager to see Medicare privatized while collecting more government subsidies, Consumers Union reluctantly concludes that, on balance, Medicare beneficiaries will be severely harmed by this proposal. We urge consumers to request their Representatives and Senators go back to the drawing board to enact legislation that meets the needs of seniors and the disabled, not legislation that is shaped by special interests.

For the full report:
http://www.consumersunion.org/1117%20medicare%20report%20final.pdf

Comment: Some politicians are concerned that a “filibuster against prescription drugs for seniors” is too great of a political price to pay for defeating this highly destructive legislation. Our task will be to make certain that the political price is paid by the true villains: those who refused to allow consideration of a bona fide prescription benefit and forced the necessity of resorting to a filibuster to protect what we already do have.