Resource – Page 1143

Dr. Quentin Young on the Medicare Prescription Drug Bill

For Immediate Release
Contacts: Quentin Young MD (312) 782-6006
December 11, 2003

Statement of Dr. Quentin Young on the Medicare Prescription Drug Bill
National Coordinator, Physicians for a National Health Program

The “Medicare reform” legislation signed into law by President Bush on December 8 is a sham and must be repealed at once. Medicare needs a straightforward full drug benefit, based on hard negotiations for the best prices from the drug companies. The current bill not only provides scrooge-like benefits; it also prohibits Medicare from adopting effective measures to contain escalating drug costs (rising 17% a year), assuring that seniors will soon be worse off under the bill than they are today.

The bill’s benefits are ephemeral. It actually worsens the position of millions of seniors and permanently disabled Medicare beneficiaries (such as persons with end-stage renal disease and HIV), and at best offers extremely limited assistance with drug costs. Of the current 6 million Medicare beneficiaries also eligible for Medicaid – the very poorest seniors and disabled persons – about half, 3 million, will lose their current excellent drug coverage through means testing. Millions more seniors who currently have near-full coverage through a former employer or Medigap plan also face higher costs for lower benefits.

The prime beneficiaries of the current legislation are not the aged and infirmed; it is the pharmaceutical industry, which is rewarded for decades of price-gouging and fraud with an additional $137 billion in profits. Wall Street immediately reacted to Congress’ largesse. Drug stock prices soared and the Bill’s Congressional supporters can expect a boost in contributions to their 2004 campaigns.

The bill prohibits the Secretary of HHS from negotiating the best price with manufacturers, despite the fact that other governmental agencies, the Veterans Administration and the Department of Defense, negotiate 40-60% discounts as major purchasers right now. Also, the bill effectively outlaws Canadian imports (with their sharply reduced prices) unless the FDA “certifies” the drugs safety; FDA commissioner McClellan had already declared he would not do this.

But most destructive is the provision of billions of dollars to private Medicare HMO’s to give them the advantage in competition with traditional Medicare. This strategy achieves Newt Gingrich’s malign vision of forcing Medicare to “wither away.”

Medicare HMOs raise Medicare’s costs by “cherry picking,” enrolling the healthy and excluding the sick. Over the last decade they have ratcheted down their benefits while dumping millions of seniors deemed unprofitable.

Add to this the “Health Savings Account” provision which will attract the wealthy and healthy into tax-free schemes. HSA’s will seriously undermine the insurance risk pool for all of us. Risk-pooling is the source of strength, prudence, and effectiveness of national health insurance. The enemies of universal coverage understand this and thus have inserted this poison pill into Medicare “reform.”

There is hope. A recent poll by ABC News/Washington Post found that the more seniors and the public learn about Bush’s Medicare bill, the less they like it. A real drug benefit is needed now more than ever, and is easy to devise. It should be administered by Medicare, with that program’s low (3%) overhead, and take advantage of Medicare’s bargaining power to reverse the skyrocketing costs of medications. It should provide a comprehensive, first-dollar benefit. Seniors in England, Canada, Australia and other industrialized countries already enjoy such benefits. American seniors deserve no less.

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Physicians for a National Health Program is a 12,000 member organization that makes its headquarters in Chicago. PNHP has spokespeople across the country. For a contact in your area, please call (312) 782-6006. Media are also invited to receive our press releases via e-mail by enrolling at www.pnhp.org.

Dr. Quentin Young is an internist in private practice in Chicago. He is a co-founder and volunteer national coordinator of PNHP for the past decade.

Insurance CEO:We’ll have national health insurance

Pittsburgh Post-Gazette
December 11, 2003
National health insurance inevitable?
Highmark CEO makes the case, says it may be solution to spiraling costs
By Pamela Gaynor

In spite of the wider role Congress created for private insurers in the recently enacted Medicare reform bill, the chief executive officer of the region’s largest health insurer yesterday said he believes the country will inevitably move toward a national health insurance plan for all age groups.

(Dr. Kenneth Melani, CEO of Highmark, Inc., when giving a speech at the University of Pittsburgh’s Graduate School of Public Health)… said a host of factors have driven double-digit increases in health care costs across the country the past four years, including technology, greater consumer demand from an aging population, litigation and labor costs. The increases, he said, had come without corresponding gains in life expectancy, earning much of the technology has proven to have dubious value.

With health care costs now accounting for roughly 15 cents of every dollar of the nation’s economic activity, he predicted a backlash among voters.

At some point, “Democrats will get into office and say the Republicans have made a big mistake. There will be sweeping reform and then we’ll have national health insurance,” Melani said. “That’s where I think we’ll end up.
I can’t say when.”

http://www.post-gazette.com/pg/03345/249907.stm

Comment: Highmark, Inc., a non-profit, Blue Cross Blue Shield affiliate, is the nation’s 11th-largest health insurer. As Highmark’s CEO, Dr. Melani has diligently followed the trends and shifting opinions in health care. As a noted insurance industry leader, his opinions certainly have credibility.

National health insurance is absolutely inevitable. It remains to be seen whether the politicians will have the courage to enact a program that ensures equity, comprehensiveness, affordability, and administrative efficiency through a publicly-administered and publicly-funded model.

It’s our task to be certain that everyone does understand the superiority of the public model.

Impact of the recent medicare legislation- New Mexico Analysis

This alert is from Health Action NM.

THE TRUTH ABOUT THE RECENTLY ENACTED MEDICARE LEGISLATION

The Senior Citizen’s Law office, Inc. and Health Action New Mexico are very concerned about provisions of the recently enacted Medicare Prescription drug bill, which was signed into law by President Bush on December 8, 2003.

The bill is more about destroying the Medicare program than delivering a comprehensive drug benefit to senior and disabled Americans. The legislation was mostly drafted in secret by Rep. Bill Thomas who excluded most Democratic conferees; the bill contains the position of house Republicans on most major issues rather than provisions of the bi-partisan Senate bill.

Everyone agrees that the bill passed because of AARP’s support, despite the opposition of an overwhelming majority of its members. Senator Domenici, Rep. Pearce, and Rep. Heather Wilson voted in favor of the legislation.

Senator Bingaman and Rep. Udall opposed the legislation. Seniors around the country are denouncing AARP and revoking their membership. You can reach AARP at the following e-mail addresses:

wdnovelli@aarp.org, member@aarp.org . You may also want to call your legislators and chastise them or thank them for their votes. Itemized below are the concerns of SCLO and HANM regarding the legislation.

* Basic Prescription Drug Coverage: Beginning 2006, a complicated prescription drug benefit will be available though with substantial out-of-pocket costs. Coverage will be available only through insurance companies and HMOs. Though enrollment will be “voluntary,” there will be considerable financial pressure to enroll at once. (It will be costly to enroll at a later time.)

* Benefit: Enrollees will pay the following initial costs for the initial benefits described herein. A minimum monthly premium of $35 (premiums may vary), a $250 annual deductible, 25% of costs up to $2,250, 100% of costs up to $5,100 (a gap of $2,850), and 5% of costs above $5,100. (or total out-of-pocket costs of $3,600).

Remember these are the anticipated initial costs and benefits. “Initial’ refers to the fact that these figures will increase each year by at least 10%”. Insurance premiums, which are not set in the bill even for 2006, are projected to rise 65% to $58 a month in 2013.

Enrollees will be required to pay monthly premiums during the period of time that they receive no benefits (the “donut hole”) and must pay the full cost of their medications.

* Low-Income Benefit: Imposes an assets test for the low-income benefit and denies low-income dual eligibles (those who receive both Medicare and Medicaid) the ability to continue to get wrap-around assistance through Medicaid (e.g. if a drug is not on the Medicare formulary but is on the state’s Medicaid formulary, a dually eligible enrollee will not be able to access the Medicaid drug). Also, low-ncome beneficiaries will be required to pay a modest co-payment for medications; under Medicaid there is currently no co-payment. In New Mexico, an estimated 33,000 low-income Medicare beneficiaries will be negatively impacted by the legislation.

* Income-Relating to the Part B Premium: Eliminates the universal guarantee of Medicare and imposes new bureaucracy and an assets test to qualify for the low-income benefit. The assets test raises privacy concerns for millions of Medicare beneficiaries.

* Inflating the Part B Deductible: Allows the Part B deductible to increase at a dramatic rate, at the same time many other added costs are being imposed on Medicare beneficiaries.

* Premium Support: Imposes competitive bidding beginning in 2010 in certain areas of the country, including Albuquerque. Not only are there ongoing problems with respect to plans being in and out of the medicare managed care market, benefit changes, and provider changes on an annual and even a semi-annual basis, but it is anticipated that out-of-pocket costs for seniors in pilot programs will be higher than for seniors in non-pilot locations. The irony is that New Mexico is the poorest state in the country and seniors in Albuquerque will be paying higher Medicare costs than elsewhere.

* Retiree Coverage: There will still be major drop in retiree coverage, which leads to retirees losing a much stronger benefit for a very pathetic benefit. The Congressional Budget Office estimates that 3.8 million retirees, about one-third of all non-federal retirees who have health insurance provided by their former employers, will have their more generous private coverage reduced or terminated. It is anticipated that 2.7 million retirees will lose their benefits after 2006.

* Health Savings Accounts: Gives conservatives one of the main items they want in health care and guarantees there is no further action for years on the uninsured. These tax-sheltered accounts are usable by wealthier and healthier beneficiaries. The HSAs are very problematic from a health policy perspective; their popularity may result in the destruction of the Medicare program.

* State Clawback: Imposes an effective “reverse block grant” on states in their Medicaid programs by requiring states to pay the federal government an amount each year based on some determination of their drug costs in a base year. (If the state spends more than the projected amount, then the state must reimburse the federal government the excess amount.) This provision creates major problems for the Medicaid program (e.g., nursing home care) for years to come.

* Cost Containment: Creates a budget process beginning in 2010 whereby there is a self-proclaimed “budgetary crisis” in Medicare every single year, thereby threatening Medicare from that date forward.

* Fallback: If there is not a private drug plan (PDP) in a region, the fallback is for the federal government to contract with one or more private companies to deliver the drug benefit, rather than the government providing the benefit as originally proposed. The volatility of private companies delivering “benefits” is traditionally a problem.

* Private Plan Slush Fund: The bill provides $12 billion to the Secretary in the form of a slush fund to hand out to managed care providers to try to move people out of traditional Medicare. Consequently, private companies will have an unfair advantage over the vastly more popular original Medicare program.

* Cost Containment: There is none. The bill specifically precludes the government from negotiating lower prices or discounts with drug manufacturers.

* Drug Re-importation: The law restricts the importing of less expensive drugs from Canada, Mexico and other countries.

______________________________________

Health Action New Mexico
P.O. Box 40119
Albuquerque, NM 87196
(505) 342-8081
info@healthactionnm.org

Ford exec gets new task: Solve health care crisis

Ford exec gets new task: Solve health care crisis

BY TOM WALSH
DETROIT FREE PRESS COLUMNIST

Ford Motor Co. Chief Executive Officer Bill Ford is so alarmed soaring hospital and doctor bills are destroying U.S. jobs that he has assigned one of his top executives, Vice Chairman Allan Gilmour, to craft a proposal for fixing the nation’s health care system. Ford and Gilmour would then take the idea to other companies, unions and ultimately, to public officials in Washington, D.C.

The automaker spends about $1,200 on employee and retiree health care for every vehicle it builds, a huge cost that private employers don’t bear in countries with government-funded medical care.

The health care issue “is driving investment decisions away from the U.S., and that’s wrong,” Ford told reporters Tuesday. Ford Motor, General Motors Corp. and other major U.S. industrial firms have provided generous health care benefits to hourly and salaried workers for decades. But the skyrocketing cost of those benefits — which has increased more than 10 percent annually in recent years — has saddled these firms with a competitive gap that Ford said is “so compelling that it’s very tough to offset when you want to make an investment decision” about where to build a plant and create jobs.

“I just think that as a country, if we have a model that isn’t working and a model that’s driving jobs overseas, then we’d better take another look at it,” Ford said.
Ford has spoken out before about the dangers of surging health care costs; he called the problem “intractable” in a May 30 speech at the Detroit Regional Chamber’s leadership conference on Mackinac Island. But he’s upping the ante by putting Gilmour on the case and planning to enlist other allies.

Gilmour, 69, was a highly respected longtime Ford Motor executive whom Bill Ford plucked out of retirement in May 2002 to repair the company’s financial house. During his retirement, Gilmour was chairman of the Henry Ford Health System’s board of directors in Detroit from 1996 to 2002.

Nancy Schlichting, CEO of Henry Ford Health, said Gilmour’s steady hand and sense of humor helped the hospital system navigate through a period of severe cost-cutting in which about 2,000 jobs were eliminated.

“I’ve asked Allan to head up a major health care initiative for us and involve, when the time is right, others in the industry,” Ford said. “He’s uniquely positioned to do that because he knows the issue very well. . . . He’s seen it from both sides. Plus, he’s got great external credibility, so when it’s time for him to interact in Washington, Allan will do so with authority.”

Rick Wagoner, GM’s chairman and CEO, has also decried the corrosive effect of health care costs for U.S. companies, and a GM spokesman said the company would probably be willing to discuss ideas that Ford and Gilmour might advance.

In a recent interview with Fortune magazine, Wagoner said, “We are trying to make a point in Washington that if we’re concerned about job growth in a competitive economy, it’s important to understand that health care costs are a significant competitive disadvantage” for the United States.

Ford said he has no preconceived notion of how to solve the health care crisis.
“I don’t want anyone to say Bill Ford’s out raising the banner for national health care,” he said. “But I do think we need a new model, because if the employers are getting choked with health care, and the hospitals are all losing money and the HMOs claim they’re not making any money, then the system does not seem to be working very well.

“I just think we need a dialogue on it in a national forum that we haven’t had yet. That’s why I hope Allan will be able to help us craft a position.” He said he hasn’t given Gilmour a deadline or timetable.

Despite the rising health care costs, Ford said his troops have done some herculean cost-cutting this year — about $3 billion in all areas of the company. As a result, Ford said the automaker will post a profit of about $1.8 billion this year, despite flat sales. He also said he expects 2004 “to be a better year than we had in ’03.” He said Ford Motor has beaten Wall Street profit estimates for seven straight quarters, and with cash reserves in excess of $27 billion, “We have the financial flexibility to do whatever we choose.”

Ford said he is “comfortable” with current employment levels. “I don’t anticipate anything new” in terms of head count next year, he said. Ford Motor has cut about 10,000 hourly jobs since 1996 and reduced salaried head count by a similar number during the past three years.

Cost-cutting will continue, however, and include the sourcing of more parts from China. Ford said the company will buy about $1 billion in parts from China next year. The U.S. economy, he said, is “clearly getting stronger. One of the fears I have, though, is whether it will be a full-employment recovery. We do have a lot of manufacturing jobs that are going overseas.”

Ford Motor has been billing 2004 as the “year of the car,” signaling a new emphasis on passenger cars after years of expanding its truck offerings. Most of its near-term new-car designs will be midsize and larger, but Ford said Tuesday that the firm is also exploring a minicar for the U.S. market.

The “Focus has been a very good entry-level vehicle for us, but there is a question, ‘Do we need to do something below Focus?’ ” he said. “And we’re taking a look at that. “We’re fairly far along,” he said. “But we would only do it if we could do it profitably.”

Claim vs. Fact: Medicare Bill Signing

Center for American Progress

Claim vs. Fact: Medicare Bill Signing 12/8/03

Claim: “A lot of this happened — this bill happened because of grassroots work. A lot of our fellow citizens took it upon themselves to agitate for change, to lobby on behalf of what’s right” [George W. Bush 12/08/03]

Fact: “Drug companies and their trade associations deployed nearly 700 lobbyists to stamp out any proposals that would result in the federal government negotiating the cost of drugs or otherwise limiting the industry’s astronomical profits.” [Public Citizen Report, 06/03]

Claim: “Some older Americans spend much of their Social Security checks just on their medications. Some cut down on the dosage to make a bottle of pills last longer. Elderly Americans should not have to live with those kinds of fears and hard choices. This new law will ease the burden on seniors and will give them the extra help they need.” [George W. Bush 12/08/03]

Facts: “[U]nder the new plan, seniors in the middle income quintile will pay an average of $1,650 a year in out-of-pocket expenses for prescription drugs in 2006. This figure is nearly 60 percent more than they paid in 2000, even after adjusting for inflation. Expenses are projected to continue to rise so that by 2013 middle-income seniors will be paying more than two and a half times as much for prescription drugs (adjusting for inflation) as they did in 2000.” [CEPR Report, 12/04/03]

“[T]he insurance plan would provide little relief for about 3 million people with moderate assets and incomes near the poverty level and would cost seniors with drug expenses under $835 a year more than they currently spend.” [Boston Globe, 11/18/03]

Claim: “For the first time we are giving seniors peace of mind that they will not have to face unlimited expenses for their medicine.” [George W. Bush 12/08/03]

Fact: “[The] Medicare drug plan could further limit coverage by establishing a list of preferred medicines known as a formulary… Medicare would not have to pay anything for drugs left off the list…if a beneficiary bought drugs not listed on the formulary, the bill says, those costs would not be counted toward the $3,600 limit.” [New York Times, 12/07/03]

Claim: “Bill Novelli, the CEO of AARP, stood strong in representing the people he was supposed to represent.” [George W. Bush 12/08/03]

Fact: “A poll last week by Hart Research showed that 65 percent of AARP members want Congress to go back to the drawing board.” [Alameda Times Star, 12/06/03]

Continued

© Center for American Progress
805 15th Street, NW Suite 400
Washington, D.C. 20005
202-682-1611
progress@americanprogress.org http://www.centerforamericanprogress.org

Claim: “[T]his legislation is a victory for all of America’s seniors.” [George W. Bush 12/08/03]

Facts: “Corporate lobbying groups are emerging as winners, having pushed hard for a bill in order to shift some of their costs to the government…companies can opt in, taking the proposed tax-free federal subsidy and shifting some costs to the government, or opt out and possibly cut or eliminate their own coverage altogether, a trend that is already under way.” [Wall Street Journal, 11/18/03]

“For the drug industry, the legislation is good news…Drug makers believe individual private buyers are less able to push down prices than a centralized government purchaser with a pool of 40 million patients.” [Wall Street Journal, 11/18/03]

“A substantial number of the 6.4 million low-income Medicare beneficiaries who also are eligible for Medicaid and currently receive prescription drug coverage through Medicaid would be made worse off under the Medicare conference agreement.” [Center of Budget and Policy Priorities Report, 11/21/03]

“Millions of Medicare beneficiaries have bought private insurance to fill gaps in Medicare. But a little-noticed provision of the legislation prohibits the sale of any Medigap policy that would help pay drug costs after Jan. 1, 2006, when the new Medicare drug benefit becomes available.” [New York Times, 12/07/03]

“The Congressional Budget Office estimates about 2.7 million seniors could lose benefits that may be more generous than those that will be offered under Medicare.” [USA Today, 11/25/03]

Rationing health care in Texas

INDEPTH: HEALTH CARE IN GALVESTON
Galveston, oh Galveston
Rationing health care in Texas
Reporter: Frank Koller, CBC Radio | December 8, 2003

On December 8, 2003, U.S. President George W. Bush signed a $400-billion overhaul of Medicare, the American government-run system to help the elderly with medical care. The new provisions are designed to offer some relief from the soaring costs of prescription drugs in the U.S.

Galveston As the U.S. presidential election campaign heats up, health care is emerging as perhaps the major domestic issue. The already-high costs of private health insurance are rising monthly. But 44 million people – 15 per cent of the American population – have no health insurance coverage at all.
Texas – Bush’s home state – has the highest proportion of uninsured citizens. In Galveston, the situation is so severe the local hospital has been forced to deliver medical care based on patients’ ability to pay.

Income screening

Rosalyn McCray In the financial screening centre of the University of Texas Medical Branch hospital in Galveston, Rosalyn McCray examines the bank statements of a woman desperate to see a doctor. Irene Perez has also brought a notarized letter stating she and her disabled husband earn less than $8,000 a year.

They’ve never had health insurance. Perez hopes to prove she’s so poor the hospital will declare her “medically indigent.” And let her see a doctor.
“It’s very embarrassing because we’ve never in our 20 years of marriage asked for any help,” Perez says. “We own two shrimp boats and worked for ourselves until he lost both of his kidneys. We finally lost everything because I became incapacitated also.”

The University of Texas Medical Branch is the only state-owned hospital left in Texas. For a century, people who couldn’t pay for medical care have come here for help. Some drove a thousand kilometres to sleep in their cars while waiting to see a doctor.

But the public hospital was trapped by a shrinking state budget, soaring costs for prescription drugs – and a flood of uninsured people seeking help. So it undertook what it calls “rationing of medical care.” If potential patients don’t have insurance or a fat wallet, screening officer Rosalyn McCray must decide whether or not they’re admitted. Not everyone gets in.

Heartbreaking stories

“And it can be heartbreaking when you listen to people’s stories – it’s not that we don’t have compassion but you have to do what you have to do to keep the reimbursement going,” McCray says. The hospital saw trouble ahead in the late 1990s as the number of people without health insurance in Galveston began to soar. The new CEO, Dr. John Stobo, tried traditional cost-cutting methods. They weren’t enough. “And so we had to ration health care. That’s not something I came here to do,” Stobo says. “It’s not something I like doing. People initially asked, ‘why are you doing this?’ and my response was we’re not going to be able to deliver any health care if we become indigent as an institution.”

Galveston The new system took several forms. First, the hospital cut in half the number of people it admitted without insurance. Second, they started rigorous financial screening of potential patients – some say the toughest in the U.S.

Dr. Ben Raimer, head of community medicine, designed the original system. “We often liken it to flying on an airplane,” Raimer says. “You have a guaranteed opportunity to travel safely but you have a choice between first class and coach. There may be certain amenities that people choose to have in addition.”

But even when so-called indigent patients are admitted, the scrutiny continues. Almost daily, Dr. Karen Richardson, the hospital’s medical director, makes tough decisions based on a patient’s ability to pay. Today, she approved anti-cancer drugs for a patient on financial assistance – but only prescribed half as many pills as for a patient with insurance. The indigent patient’s case will be reviewed before more treatment is approved. Richardson says a paying patient has an easier time.

“No, that wouldn’t be a question [for a paying patient] that would have been taken care of,” Richardson says. “The medications would have been taken care of and the patient would have been on their way.”

Medically Indigent

In the screening centre, Irene Perez has proven she’s “medically indigent.” Even though she makes only $650 a month, Perez will still have to pay $40 to see a doctor, probably once a week. Rosalyn McCray, the screener, doesn’t think a $40 fee is too much.

“My gut tells me they’re not going to wait. She looks like she’s in quite a bit of pain,” McCray says. “And I don’t think the $40 will be too much of an issue. I think they’re willing to make that sacrifice because she looks like she’s in quite a bit of pain. Quite a bit of pain.”

In theory, this hospital’s not the last resort for the poor in Galveston. In theory, people turned away can get help at free street clinics and the county medical centre. Chief executive officer Dr. John Stobo admits he doesn’t know how theory plays out in the real world.

“Unfortunately, we don’t know that they’re getting the health care in the communities in which they live,” Stobo says. “We try to connect them to the appropriate care-givers but whether or not they get the care they need, I’m not sure … we just don’t have a good way to track it and, in some cases, I suspect they’re not getting the health care they need.”

Street clinic

The Jesse Tree is Galveston’s biggest free street clinic, helping hundreds of people in one of Texas’s poorest cities. Ted Hanley, the clinic’s founder, says $40 is an impossible cost for too many people. It’s creating a sense of helplessness among those who need help the most.

“My deep concern is for the quiet people out there dying because they have chronic illnesses,” Hanley says. “They’re not good self-advocates. They do get the medical care by the time their conditions are already so advanced there’s no coming back.”

One in seven without insurance

One in seven Americans don’t have health insurance and the proportion is increasing. Premiums for private insurance are going up more than 10 per cent a year. Dr. Ana Malinow, a pediatrician in nearby Houston, knows all too well the financial pressure that forced the Galveston hospital to ration care. Malinow says it’s unlikely to change soon.

“In a for-profit [system] there is no incentive to keep costs down, is there?” Malinow says. “So when people say ..oh … in the government we need to be fiscally conservative … blah blah blah … it’s all crap, because they know that what they want is to increase their profits and the only way to be increasing profits is for there to be more money in the system.”

No one at Galveston’s hospital boasts about the health care restrictions. No one waxes poetic about so-called “financial efficiencies.” Many are prophetic, however, that what they’ve had to do represents the cruel logic of a broken national medical care system.

“I can’t imagine there’s a hospital in the United States that isn’t facing this problem,” says Dr. Karen Richardson. “We also feel like we have an advocacy responsibility to shine some light on this issue and talk about what everybody else will soon have to do.”

Poison pill

Boston Globe

Poison pill

Why the new reform bill will make Medicare’s problems bigger — and even harder to fix

By Jacob S. Hacker and Theodore R. Marmor, 12/7/2003

TOMORROW, PRESIDENT BUSH is set to sign Medicare’s biggest overhaul in 38 years into law. But after watching the shrill yet perfunctory debate that culminated last week in the passage of the bill, even close observers of Washington politics can be forgiven for wondering just what exactly it was all about. On one side, congressional Republicans and President Bush described the $400-billion legislation as a moderate, sensible means of providing long-overdue drug coverage to seniors.

On the other, Democratic opponents — including most House Democrats, Senate minority leader Tom Daschle, and Senator Ted Kennedy, who led an unsuccessful filibuster — decried it as a monstrous giveaway to insurers and drug companies. They also charged that it was a “Trojan horse” aimed at crippling Medicare’s universal benefits in order to foster go-it-alone competition.

All this becomes more understandable when one recognizes that the bill is really two bills. The first provides a much-needed, if modest and excessively complex, drug benefit. But while this new benefit is generous for some low-income seniors, it will end up raising out-of-pocket drug costs for other poor beneficiaries. And because it is poorly designed and does not include effective ways of controlling drug costs, the plan will ultimatelyleave most seniors little better off than they are today, and some worse off.

The second, darker side of the new Medicare bill is a slew of changes that have little or nothing to do with drug coverage and everything to do with special-interest demands and ideological animus toward Medicare. These include huge new subsidies for private insurers, and provisions that ensure that drug companies will be spared from their greatest fear: that Medicare will use its massive buying power to demand reductions in drug prices. Perhaps most ominous, the bill also contains elements that favor private plans and risk further degeneration of Medicare’s all-in-the-same-boat structure.

Six sizable”demonstration projects” are intended to introduce greater competition into Medicare; they will also likely raise costs for seniors who remain in the traditional program.

What is most striking about the bill is not the consistency of its vision, but its deep incoherence. In the name of greater free-market competition, the legislation offers massive new subsidies to the pharmaceutical and insurance industries. In the name of providing greater protection, it threatens Medicare’s guarantee of universal benefits. (Indeed, it even provides more than $6 billion to support Health Savings Accounts outside of Medicare, risking the fragmentation of the broader insurance risk pool.) And in the name of greater cost containment, it encourages the expansion of private plans that have, to date, not saved medicare money, while creating new budgetary rules that could very well make Medicare less equitable and affordable down the road.

Behind these glaring inconsistencies lies the one great fact of contemporary American politics: partisan and ideological polarization. But if the bill were the product of political conflict alone, we would expect not a massive new entitlement with so many contradictions and problems but a more modest, lowest-common-denominator agreement — for example, a bill covering catastrophic drugs costs only. Instead, what we have is a bill driven principally by a mix of high Republican ideals and low political calculations that was crafted almost entirely in isolation from Democratic input and then tweaked just enough to win moderate votes and sidestep potentially hostile public opinion.

This brings us to the most overlooked reason for the unnecessary and self-defeating complexity: the conservative reform agenda itself, which is simultaneously driven by ideological principles that celebrate free competition and the interests of powerful industries that hope to avoid it at all costs. Private insurers and drug companies don’t want true competition: They want a playing field tilted in their favor. And they’re willing to do whatever it takes to seize the advantage, including, according to recent news reports, bidding exorbitant sums for the future lobbying services of the current Medicare administrator, Thomas Scully. Republicans, eager to win campaign funds and hostile to the very idea of Medicare, essentially gave the medical industry what it wanted. But what they produced has about the same intellectual purity as an ad jingle.

To be sure, politics usually requires compromises. But what’s shameful about the present bill is just how deeply the compromises — or, more accurately, the concessions to knee-jerk beliefs and private interests — undercut the stated goal of the bill: drug coverage for seniors. By our back-of-the envelope calculations, the roughly $400 billion in new spending over the next 10 years (not to mention the $140 billion in new premiums paid by Medicare beneficiaries themselves) will buy only about half as much coverage as a sensibly designed bill could. This is not only because of the subsidies for private health plans and for Health Savings Accounts, but also because of the higher overhead costs of private plans (about five to six times higher than for traditional Medicare) and the 20-to-30-percent higher prices for drugs that seniors will have to pay because Medicare is forbidden from using its bargaining power to negotiate better deals.

All this helps explain why the drug benefit itself is so convoluted and ultimately so meager — covering, for example, only a small share of seniors’ expected drug expenses overall, and reimbursing the 300th dollar of drug spending but not the 3,000th. It also helps explain why, according to polls, seniors already don’t like the benefit very much. A recent University of Pennsylvania survey, for example, shows opposition to the bill outweighing support by two percentage points among the general public, but by some 16 points among Americans over 65.

Indeed, a significant proportion of Medicare beneficiaries will almost certainly be worse, not better, off under the bill. This includes several million low-income seniors who will lose the generous coverage they now enjoy under state Medicaid programs. It also includes millions who already have pretty good drug coverage through their former employers — coverage which will likely be dropped, despite the bill’s subsidies for employers that retain coverage.

Even if these clear losses are ignored, all credible estimates suggests that, except for the very poor and very sick, drug spending will consume a larger share of seniors’ incomes in the coming years than it does now, despite the new legislation. This is not just because the benefit is so meager, but also because the bill fails to authorize the negotiation strategies that large corporations and public programs like the veterans’ health plan use to rein in skyrocketing drug prices. Fortunately for Republicans, none of this will become crystal clear until after the 2004 election, because — not coincidentally — the new drug benefit does not kick in until 2006.

onetheless, some hopeful Democrats argue the bill is worth supporting bcause it will, in the long term, be a stepping stone to a good drug benefit and sensible Medicare reforms. Might they have a point? Making the benefit more rational and generous, especially for low-income seniors and those with high but not catastrophic drug costs, is essential. But for three important reasons, the new bill is unlikely to be refined and improved down the line.

The first is the dismal historical record of Medicare’s attempts to encourage private plans within the program. If the past is any guide, the next debate will not concern the expansion of benefits but figuring out how to make the amazingly complex legislation actually work. And there will be considerable pressure from conservatives to delay any major changes until after the demonstration projects designed to showcase the alleged benefits of market competition occur — in 2010.

Furthermore, efforts to upgrade the benefit will run headlong into the massive budget deficit, and into the fact that the profligate legislation has no effective cost-control mechanisms.

Finally, the legislation’s one bow to cost control is guaranteed to create conflict on terrain highly unfavorable to those seeking to expand and rationalize benefits. In a relatively unnoticed provision that wasn’t in either the original House or Senate legislation, the bill creates a new standard for Medicare “insolvency.” It would define the program as insolvent whenever, in two consecutive years, more than 45 percent of its spending comes from general income tax revenues (not incidentally, the most progressive source of Medicare financing) rather than payroll taxes and premiums. When this ceiling is hit, which is likely to happen sometime in the next decade, the law will require the president to propose spending cuts and tax increases within the program. That’s likely to cause benefit cuts and premium hikes, not benefit expansions.

It’s also certain to cause political conflict — which may be the bill’s ultimate contradiction. Republicans hope to take off the table an issue with which they have been battered for years, and they may well do so through 2006. But by pushing through such an unwieldy bill, they are virtually ensuring that Medicare will be the biggest issue in American politics in the coming decades. Sadly, at the present juncture, that seems to promise more acrimony, confusion, and disappointment, rather than the constructive steps forward that Medicare so desperately needs.

Jacob S. Hacker, assistant professor of political science at Yale and a fellow at the New America Foundation, is author most recently of “The Divided Welfare State.” Theodore R. Marmor, professor at Yale School of Management, is author most recently of “The Politics of Medicare” (2d edition).

An Impending Catastrophe

Quentin Young, M.D., makes his diagnosis clear—America’s health care system is failing. With more than 44 million Americans lacking health insurance, the argument for universal coverage has never been more relevant, he says. Dr. Young has been fighting to abolish profit-driven managed care for most of his medical career, which has spanned more than 50 years. After graduating from Northwestern Medical School, he completed his residency at Cook County Hospital, where he served as chairman of the Department of Internal Medicine through the early 1980s.

The 80-year-old doctor still practices three days a week in Hyde Park and can often be heard as an expert guest on WBEZ, Chicago public radio. He’s a clinical professor of preventive medicine and community health at the University of Illinois Medical Center and senior attending physician at Michael Reese Hospital. Despite remaining active in the medical community, Dr. Young devotes most of his time to combatting the corporate takeover of medicine in America. In 1980, he founded the Health & Medicine Policy Research Group, of which he is currently chairman. Additionally, Dr. Young has mobilized the Chicago-based Physicians for a National Health Program, acting as the organization’s national coordinator. Currently, PNHP consists of more than 10,000 physicians who support a single payer national health insurance. Dr. Young discusses his health care plan, its goals, obstacles and what America has in its favor.

click here to read the interview in Chicago Life

Single payer study for Missouri: Same compelling result

Missouri Foundation for Health
Press Release
November 25, 2003
New Report Details Universal Care for Missouri

The study “A Universal Health Care Plan for Missouri” highlights a coverage plan that could be delivered in the state for less than the nearly $30 billion currently spent on health care this year.

The study, commissioned by the Foundation and carried out by Kenneth.Thorpe, Robert W. Woodruff Professor and Chair of the Department of Health Policy and Management at Emory University in Atlanta, examined the impact of a single payer tax-based system on current health expenditures in Missouri.

The study reviewed three possible benefit levels- similar, better and worse than the current average private health insurance policy in the state. Even the more generous plan under the system proposed by Thorpe would save more than a billion dollars from the current Missouri health expenditures.

The proposed plan would be funded by a payroll tax similar to the way the
Federal Medicare program is funded. Businesses that currently provide health
insurance, and their employees, would pay less in taxes than they do now in
premiums. Employers who do not provide health insurance now would pay more
as would the uninsured who would obtain coverage under the plan.

The savings that would allow expansion to cover all residents of the state would be largely derived from lower administrative costs associated with a single payer.

http://www.mffh.org/press_releases/pr-11-25-03.pdf

The report, “A Universal Health Care Plan for Missouri”:
http://www.mffh.org/ShowMe3.pdf

Comment: You would think that our national policymakers would begin to recognize a pattern here. The single payer model has become the golden standard against which all other models of reform should be compared.

Do we really need another study? Or shall we just finally do it!?

Looting the Future

Looting the Future
By PAUL KRUGMAN, NY Times
Published: December 5, 2003

Bush, George W
Republican Party
United States Politics and Government
Budgets and Budgeting

One thing you have to say about George W. Bush: he’s got a great sense of humor. At a recent fund-raiser, according to The Associated Press, he described eliminating weapons of mass destruction from Iraq and ensuring the solvency of Medicare as some of his administration’s accomplishments.

Then came the punch line: “I came to this office to solve problems and not pass them on to future presidents and future generations.” He must have had them rolling in the aisles.

In the early months of the Bush administration, one often heard that “the grown-ups are back in charge.” But if being a grown-up means planning for the future — in fact, if it means anything beyond marital fidelity — then this is the least grown-up administration in American history. It governs like there’s no tomorrow.

Nothing in our national experience prepared us for the spectacle of a government launching a war, increasing farm subsidies and establishing an expensive new Medicare entitlement — and not only failing to come up with a plan to pay for all this spending in the face of budget deficits, but cutting taxes at the same time.

Recent good economic news doesn’t change the verdict. These aren’t temporary measures aimed at getting the economy back on its feet; they’re permanent drains on the budget. Serious estimates show a long-term budget gap, even with a recovery, of at least 25 percent of federal spending. That is, the federal government — including Medicare, which Mr. Bush has given new responsibilities without new resources — is nowhere near solvent.

Then there’s international trade policy. Here’s how the steel story looks from Europe: the administration imposed an illegal tariff for domestic political reasons, then changed its mind when threatened with retaliatory tariffs focused on likely swing states. So the U.S. has squandered its credibility: it is now seen as a nation that honors promises only when it’s politically convenient.

What really makes me wonder whether this republic can be saved, however, is the downward spiral in governance, the hijacking of public policy by private interests.

The new Medicare bill is a huge subsidy for drug and insurance companies, coupled with a small benefit for retirees. In comparison, the energy bill — which stalled last month, but will come back — has a sort of purity: it barely even pretends to be anything other than corporate welfare. Did you hear about the subsidy that will help Shreveport get its first Hooters restaurant?

And it’s not just legislation: hardly a day goes by without an administrative decision that just happens to confer huge benefits on favored corporations, at the public’s expense. For example, last month the Internal Revenue Service dropped its efforts to crack down on the synfuel tax break — a famously abused measure that was supposed to encourage the production of alternative fuels, but has ended up giving companies billions in tax credits for spraying coal with a bit of diesel oil. The I.R.S. denies charges by Bill Henck, one of its own lawyers, that it buckled under political pressure. Coincidentally, according to The Wall Street Journal, Mr. Henck has suddenly found himself among the tiny minority of taxpayers facing an I.R.S. audit.

Awhile back, George Akerlof, the Nobel laureate in economics, described what’s happening to public policy as “a form of looting.” Some scoffed at the time, but now even publications like The Economist, which has consistently made excuses for the administration, are sounding the alarm.

To be fair, the looting is a partly bipartisan affair. More than a few Democrats threw their support behind the Medicare bill, the energy bill or both. But the Bush administration and the Republican leadership in Congress are leading the looting party. What are they thinking?

The prevailing theory among grown-up Republicans — yes, they still exist — seems to be that Mr. Bush is simply doing whatever it takes to win the next election. After that, he’ll put the political operatives in their place, bring in the policy experts and finally get down to the business of running the country.

But I think they’re in denial. Everything we know suggests that Mr. Bush’s people have given as little thought to running America after the election as they gave to running Iraq after the fall of Baghdad. And they will have no idea what to do when things fall apart.

Employers' response to health care costs

Hewitt Associates
Press Release
December 2, 2003
Hewitt Study Shows Employers Critically Concerned with Health Care
Costs and Looking for Creative Solutions

Employers are struggling to cope with continuing double digit health care
cost increases, more interested than ever in consumer-driven plans and actively developing strategies and economic incentives to drive and enable better employee health care decisions, according to a new survey by global human resources outsourcing and consulting firm Hewitt Associates.

Hewitt’s survey of nearly 650 major U.S. companies revealed that companies
anticipate an average health care cost increase of 14 percent for 2004, but can only afford to absorb an increase of 9 percent.

Companies’ interest in implementing consumer-driven health plans as a means to control costs continues to grow, according to Hewitt’s survey. The most common consumer-driven models currently in use or planned for 2004 are customized design plan, which allows employees to customize their benefit options, levels and contributions for physician, hospital and pharmacy benefits (13 percent of companies surveyed) and health accounts plus high deductibles (12 percent).

Consumer-driven health plans that combine a health reimbursement account
with PPO coverage after a bridged deductible are also growing in popularity…
… the number of employees and participants in consumer plans will grow
exponentially over the next five years…

Employer confidence in employees’ taking greater responsibility for making
health care choices is growing…

Employers Look to the Government for Help

While the overwhelming majority of employers do not support national health
care, an increasing number feel that the government should play a limited
role in helping control skyrocketing costs and in making legislative changes to help drive consumerism, such as mandating quality reporting by hospitals and physicians (85 percent), requiring providers to disclose prices publicly (70 percent), mandating uniform provider data and payment reporting if long-term savings outweigh costs (64 percent) and allowing U.S.consumers to purchase prescription drugs from foreign countries (47 percent). More than half of all respondents (58 percent) indicated that they feel the federal government should make Medicare available to retirees ages 55-64 at their own cost.

http://was4.hewitt.com/hewitt/resource/newsroom/pressrel/2003/12-02-03.htm

The Hartford Courant
December 3, 2003
Employers Shift Health Care Costs In New Ways
By Diane Levick

… Hewitt survey …

Though still in the minority, 21 percent of large employers think the government should develop a universal health care system, compared with 17 percent in last year’s survey, according to Hewitt. Half the employers this year oppose a universal system, and the rest weren’t sure.

http://www.ctnow.com/business/hc-healthsurvey1203.artdec03,1,5493792.story?coll=hc-headlines-business

Comment: Pro-market, MBA-type responses would be expected from this survey
of health program managers of large, mostly self-insured employers. So it is
no surprise that support for a universal health care system remains quite
modest, though growing. It is also no surprise that marketplace advocates are willing to compromise their purity by advocating for government solutions that distort or even nullify markets when it is to their benefit.

This pro-market, anti-government bias leaves the thinking of the MBA health
managers confined within their traditional boxes. Their rigid thinking is
leading to conclusions that costs need to be shifted from employers to employees through consumer-driven strategies. But by accepting the market as
being less fallible than the government, it leaves in place market mechanisms that are continuing to drive costs up well in excess of inflation, and that are shifting more costs to the payers as a result of the highly inequitable method that the marketplace uses to fund health care. The MBA health managers need to move their thinking out of the marketplace box, and look also at other solutions that would control costs and ensure equitable funding.

A government-run, taxpayer-financed program of national health insurance
would contain costs and would establish an equitable method of funding
care. And it would do so without the necessity of establishing consumer-driven
financial barriers to beneficial care. And who more than MBAs would understand the benefits of the well-documented administrative efficiency of public insurance when contrasted to private plans?

MBAs instinctively should support a system that would finally contain health
care costs and would do so equitably. The business community would greatly
benefit from a universal program of social insurance. Business leaders
and their MBA advisors need to expand their list of reform options under
consideration. It is our task to be certain that they are more thoroughly
informed on the universal, publicly-funded and publicly-administered
model.

When ideology is set aside, and all options are assessed objectively, employer support of a government insurance system should be an inevitability. In fact, a majority already support expansion of eligibility for Medicare, a government insurance system. We’re part way there.

Employers’ response to health care costs