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.

Los Angeles Times
November 17, 2003
Deal Would Alter Medicare’s Core
If a compromise bill on prescription drugs passes, the government program
will become a massive subsidized insurance market.
By Vicki Kemper

As Congress prepares to vote on a final $400-billion Medicare prescription drug bill, there is one thing on which most lawmakers agree: The legislation would, over time, change the essence of the 38-year-old health insurance program for the elderly and disabled.

Now, the government sets the prices for thousands of medical services and pays the bills. But under the Medicare reform legislation, some details of which were released Sunday, the government would pay private insurance companies and managed-care plans billions of dollars in incentives to compete with traditional Medicare for the prescription drug business and general health-care needs of more than 40 million Americans.

It is that fundamental difference – Medicare as a government program versus Medicare as a huge government-subsidized health insurance market – that underlies the deep divisions between Democratic opponents of the bill and its Republican supporters.

With Republicans in control of both Congress and the House-Senate committee
that shaped the compromise legislation, it is not surprising that the GOP goal of containing Medicare costs by turning much of the program over to the private sector prevailed over Democrats’ desire to maintain Medicare as a social insurance program.

For Rep. Bill Thomas (R-Bakersfield), chairman of the House-Senate negotiating committee, the legislation is all about reducing the government’s financial burden for seniors’ health care while making Medicare sustainable over the long term and adding a major benefit.

“Over the next decade, [the bill] will also change the relationship between taxpayers and an ever more expensive program,” he said.

http://www.latimes.com/news/printedition/asection/la-na-medicare17nov17,1,5618060.story?coll=la-news-a_section

The New York Times
November 18, 2003
Medicare Plan Covering Drugs Backed by AARP
By Robert Pear and Robin Toner

AARP, the largest and most influential organization of older Americans, threw its weight behind a bill on Monday that offers drug benefits to the elderly as part of the biggest transformation of Medicare in its 38-year history.

The group will support the bill with $7 million worth of newspaper and author of the premium support proposal along with Rep. Bill Thomas and Sen. Bill Frist.
Thus the only representation that the Democrats really had was “TheGreat
Compromiser” Sen. Max Baucus. Sen. Baucus’ negotiating style is to enter
negotiations by playing all of his cards immediately, and then negotiate the
proposals that originate from the right. Since he is no match for Bill Thomas, the process ended with the approval of the agenda of the far right. With this process no outcome other than privatization of Medicare was remotely possible.

The prescription benefit alone is totally unsatisfactory because it fails to place prescription drugs under the same type of cost controls that the rest of the health care delivery system has. Affordability must be a prime consideration. Also, the bill grants private plans the control of prescription benefits. And the actual benefit provided is significantly deficient. As stand-alone legislation, it should be rejected so that Congress can move forward with a legitimate prescription program.

But, far worse, the innumerable measures included to meet Thomas’ goal of “reducing the government’s financial burden for seniors’ health care” are deliberately designed to destroy Medicare as a program of social insurance.
It reduces the government’s financial burden by shifting more of the funding
of health care back to the patient. Once fragmented by private options, the
traditional Medicare program will be severely underfunded, like Medicaid.
But the traditional program will have only about half of the benefits of Medicaid, unless they are successful in further reducing the “unaffordable” Medicare benefit package. An underfunded, stripped-down, welfare-type program for the sick and poor is not the Medicare transformation that we need or want.

AARP is deservedly the most influential organization representing the interests of the seniors of this nation. William Novelli has firmly staked his position in support of private interests at the cost of AARP’s members. There are only two choices for us. Either William Novelli must resign, or he must witness the greatest exit of an organization’s membership in the history of mankind. But we really need AARP to continue its role as the credible voice of seniors. The only real option is that Novelli must go.

Destroying Medicare for a crummy prescription benefit is not a compromise.
It’s a sell-out!

Los Angeles Times
November 17, 2003
Deal Would Alter Medicare’s Core
If a compromise bill on prescription drugs passes, the government program
will become a massive subsidized insurance market.
By Vicki Kemper

As Congress prepares to vote on a final $400-billion Medicare prescription drug bill, there is one thing on which most lawmakers agree: The legislation would, over time, change the essence of the 38-year-old health insurance program for the elderly and disabled.

Now, the government sets the prices for thousands of medical services and pays the bills. But under the Medicare reform legislation, some details of which were released Sunday, the government would pay private insurance companies and managed-care plans billions of dollars in incentives to compete with traditional Medicare for the prescription drug business and general health-care needs of more than 40 million Americans.

It is that fundamental difference – Medicare as a government program versus Medicare as a huge government-subsidized health insurance market – that underlies the deep divisions between Democratic opponents of the bill and its Republican supporters.

With Republicans in control of both Congress and the House-Senate committee
that shaped the compromise legislation, it is not surprising that the GOP goal of containing Medicare costs by turning much of the program over to the private sector prevailed over Democrats’ desire to maintain Medicare as a social insurance program.

For Rep. Bill Thomas (R-Bakersfield), chairman of the House-Senate negotiating committee, the legislation is all about reducing the government’s financial burden for seniors’ health care while making Medicare sustainable over the long term and adding a major benefit.

“Over the next decade, [the bill] will also change the relationship between taxpayers and an ever more expensive program,” he said.

http://www.latimes.com/news/printedition/asection/la-na-medicare17nov17,1,5618060.story?coll=la-news-a_section

The New York Times
November 18, 2003
Medicare Plan Covering Drugs Backed by AARP
By Robert Pear and Robin Toner

AARP, the largest and most influential organization of older Americans, threw its weight behind a bill on Monday that offers drug benefits to the elderly as part of the biggest transformation of Medicare in its 38-year history.

The group will support the bill with $7 million worth of newspaper and author of the premium support proposal along with Rep. Bill Thomas and Sen. Bill Frist.
Thus the only representation that the Democrats really had was “TheGreat
Compromiser” Sen. Max Baucus. Sen. Baucus’ negotiating style is to enter
negotiations by playing all of his cards immediately, and then negotiate the
proposals that originate from the right. Since he is no match for Bill Thomas, the process ended with the approval of the agenda of the far right. With this process no outcome other than privatization of Medicare was remotely possible.

The prescription benefit alone is totally unsatisfactory because it fails to place prescription drugs under the same type of cost controls that the rest of the health care delivery system has. Affordability must be a prime consideration. Also, the bill grants private plans the control of prescription benefits. And the actual benefit provided is significantly deficient. As stand-alone legislation, it should be rejected so that Congress can move forward with a legitimate prescription program.

But, far worse, the innumerable measures included to meet Thomas’ goal of “reducing the government’s financial burden for seniors’ health care” are deliberately designed to destroy Medicare as a program of social insurance.
It reduces the government’s financial burden by shifting more of the funding
of health care back to the patient. Once fragmented by private options, the
traditional Medicare program will be severely underfunded, like Medicaid.
But the traditional program will have only about half of the benefits of Medicaid, unless they are successful in further reducing the “unaffordable” Medicare benefit package. An underfunded, stripped-down, welfare-type program for the sick and poor is not the Medicare transformation that we need or want.

AARP is deservedly the most influential organization representing the interests of the seniors of this nation. William Novelli has firmly staked his position in support of private interests at the cost of AARP’s members. There are only two choices for us. Either William Novelli must resign, or he must witness the greatest exit of an organization’s membership in the history of mankind. But we really need AARP to continue its role as the credible voice of seniors. The only real option is that Novelli must go.

Destroying Medicare for a crummy prescription benefit is not a compromise.
It’s a sell-out!

Los Angeles Times
November 10, 2003
Import Canadian Prices, Not Drugs

Re “Open Door to Drug Imports,” editorial, Nov. 6: We don’t need to import
drugs from Canada. Instead, we need to import Canadian drug prices.

Medicare already has in place mechanisms to control the fees and prices of
physicians, hospitals, laboratories and other providers of health-care services and products. Although it is not a perfect process, rates are set to cover expenses and provide a fair profit. The system prevents excessive payments to providers.

If a bona fide prescription benefit were to be added to the Medicare program, the same fair rules would be applied to the pharmaceutical firms. Drugs are an essential element of modern health care. It’s time to include them in Medicare under a similar regulatory process that would ensure affordability.

Our system of funding Medicare has not prevented the development of newer
medical technology. Likewise, it will not prevent the development of newer
pharmaceutical agents. The drug companies will always strive to earn their
share of the $1.66 trillion that we are already spending on health care.

Don McCanne MD

San Juan Capistrano

*

The solution is not importing prescriptions but mandating fair-pricing practices. If a manufacturer can sell at reduced prices to Canadian pharmacies, the same prices should be available to pharmacies in the U.S.

Everyone is complaining about rising health-care costs, which stem from high
drug costs, yet we turn our heads when the solution is so clear. In order to
keep health insurance rates down, we have to keep drug prices down. This means that the manufacturers must be accountable for fair and equitable
pricing.

Importation is a simple fix to some, without attempting to solve the problem. We have to lower the cost of medications by making the pricing the same for Canada and the U.S. Only when this happens will the costs of health care be controlled.

Charles S. Franklin

Pharmacist, La Quinta

http://www.latimes.com/news/opinion/letters/la-le-mcanne10.1nov10,1,3511530.story?coll=la-news-comment-letters

Comment: Virtually everyone agrees that access to health care is not complete unless patients have access to affordable prescription drugs. Politicians recognize this and promised us in the last election that prescription coverage would be included as a benefit under Medicare.

But we are seeing that participants in the political process can use a popular
mandate to advance their own nefarious ends.

If they were sincere on what we thought was their promise, we would already
see significant benefits. Most importantly, Medicare beneficiaries would now
have affordable access to prescription drugs. Also, the pharmaceutical industry would join the rest of the health care industry in being required to accept the fair pricing that only a regulatory environment can assure.

The free market has served to drive prices up to the maximum tolerated rather than bringing prices down through patient-friendly forces of competition. Furthermore, including prescription coverage would reduce the pressure for Medicare beneficiaries to move into private plans that have provided less value to the taxpayers than has the traditional Medicare program.

But, tragically, the process has moved to behind closed doors with only the
ideologues invited in (plus the token presence of Sen. Baucus). Their goals
are to protect the free-market pricing of the pharmaceutical firms, but,
more importantly, to use this political opportunity to inflict near-fatal blows to Medicare, a program they hate primarily because it is a “government” program.

Through strategic leaks, we know what is happening behind those closed doors. The actual prescription benefit is largely a sham. Very few will benefit from the coverage. The administration of the benefit will be primarily by private middlemen rather than through the publicly-administered, traditional Medicare program. Measures are being included which prohibit the government from providing any regulatory input that might prevent the pharmaceutical firms from charging the maximum that the market will bear. Medicare premiums will be means-tested which will give the affluent a financial incentive to leave the traditional Medicare program. The intent is to then require the traditional program, with a concentration of high-cost, low-income enrollees, to compete with the private plans. This would result in the death spiral of the traditional program.

The political debate now centers around the privatization issue. Sen. Kennedy threatens to prevent its passage if the competition proposal is included. The House ideologues threaten to oppose it if competition is not included. Lost in this is the actual prescription coverage. It is grossly inadequate. But Sen. Kennedy believes that it should be passed because it will open the door to a program that can be repaired later. But he will not do this at the cost of destroying Medicare as a program of social insurance.

The ideologues seem to be willing to take a stand, challenging Sen.Kennedy
and colleagues to block it in the Senate. They can then take the issue to
the voters, claiming that it’s the Democrats who denied Medicare beneficiaries of their prescription benefit.

The issues are complex. But the voters need to understand them. Candidates
must be confronted with a public that demands to know whether they support a
bona fide prescription program or if they are using this issue to take a
sword to the Medicare beast.

Medicare might be a beast, but it’s our beast.(Since this message has great urgency, please consider distributing it to those who do care about our Medicare program.)

Don McCanne

The Norway Post
9 November 2003
New national health card

Next year, 4.5 million Norwegians may be issued a new, international health card which will guarantee immediate help in all countries of the European Economic Area (EEA).

The new card will replace form E-111, which Norwegians are adviced to carry
when travelling in Europe, confirming that you are a member of the Norwegian
Social Security System. Otherwise you may have to pay for your treatment, if
you should get sick.

The EU decided last year to replace form E-111 with a new “plastic card”, and the Norwegian health authorities have decided to introduce the new card from June next year.

To simplify the introduction, and make the system better known, the authorities are now considering issuing the card to all Norwegian citizens, regardless of whether they are planning an immediate trip abroad, or not.

The new card will not make the usual travel insurance obsolete, as the travel insurance also covers lost luggage, or free home travel in case of illness.

http://www.norwaypost.no/content.asp?cluster_id=23777&folder_id=1

Comment: The World Health Organization ranks the United States 72nd on the
performance of our health care system based on our level of health, below
all industrialized nations and below many third world nations.

Just imagine. If we had a universal system of social insurance that improved the allocation of our health care resources, we could also be considering joining with other nations in ensuring that health security is always guaranteed. But lacking a rational system, what country would want to enter an agreement with us?

The Washington Post
November 6, 2003
Stores Follow Wal-Mart’s Lead in Labor
By Greg Schneider and Dina ElBoghdady

Wal-Mart, the world’s biggest retailer and the nation’s biggest private employer, has become so powerful that its practices reverberate throughout the U.S. economy. About as many people work for Wal-Mart — 1.3 million — as are on active duty in the U.S. military. Its most recent annual sales — $245 billion — are greater than the gross domestic product of Switzerland.

Wal-Mart’s vast, non-unionized work force earns a typical wage of about $7
to $8 an hour. Unionized workers at Kroger, by contrast, said they were making between $11 and $13 an hour, with full health benefits. About 62 percent of Wal-Mart workers are eligible for benefits, but less than half of the workforce participates. Critics say the low participation is because Wal-Mart requires steep employee contributions.

Some economists argue that the Wal-Martization of the American workforce is
simply the free-market system functioning as it should. Gary Stibel, founder
and principal of the New England Consulting Group, said Wal-Mart has saved
consumers more than $20 billion through its discount pricing. Figuring in Wal-Mart’s pressure on other retailers to lower prices, savings top $100 billion, he said.

“In this day and age, the United States needs more companies like Wal-Mart
to create jobs, even if not at the highest pay,” Stibel said. “The company
that makes its mark by taking the cost of manufacturing products and services up will lose, and the country that promotes that will lose.”

For retailers, competing with Wal-Mart means not just holding down wages, but curbing health care costs, which are becoming an increasing burden on employers nationwide.

A report by the AFL-CIO, which has tried and failed to organize Wal-Mart workers, said the retailer insures only about 45 percent of its workforce. Wal-Mart workers must pay about one-third of the cost of their health care premiums, while employees at other large companies typically pay 16 to 25 percent, the report said.

The result is that many Wal-Mart workers transfer the health care burden either to their spouse’s employer or to government agencies, the report said.

Some employees at Minneapolis-based Target Corp., a non-union company once
known for its generous employee benefits, say they believe price competition with Wal-Mart caused their employer to cut benefits as well.

In April, Target rolled out a new health care plan for 2004 that offered generous benefits, but only for employees who averaged more than 32 hours of work each week. Some Target employees say the company then hired more workers and reduced existing workers’ schedules so they no longer qualified for the plan.