Medicare and drug costs

With a federal commission formed to address the future of Medicare failing to recommend action, President Clinton is expected in the next few weeks to produce his own plan on the health-care coverage — or partial coverage — for senior citizens. When he does, pharmaceutical costs should be part of his program.

The 17-member commission, led by Sen. John Breaux of Louisiana, was charged this spring with finding a way to keep Medicare afloat beyond 2015, the approximate date the system is expected to go broke. Medicare pays for some but not all of the medical bills for 39 million elderly and disabled Americans. The commission sought but failed to find a private-sector answer to the problem. Rep. Tom Allen has one, or at least a partial one, in his plan to negotiate discounts with pharmaceutical companies. He suggests a straightforward, business-oriented proposition of lower prices in exchange for a large number of customers, with drug companies absorbing the cost. It’s the kind of deal health maintenance organizations make routinely and is similar to a health program for veterans. Sen. Olympia Snowe, along with Sen. Don Wyden of Oregon, have proposed a more traditional fee-for-service approach, to be paid for through taxes.

Before any legislation goes forward, however, members of Congress need to get a better understanding of why increases in the price of drugs have far exceeded the medical inflation rate. One place to look: Return on investment was wonderful for investors in pharmaceuticals last year — too bad the profits came at the expense of the ill and elderly.

Slowly, state by state, the House Committee on Government Reform and Oversight is highlighting the size of this problem. Its studies of prescription drug pricing by congressional district are giving members of Congress a fuller understanding of the costs born by their constituents. In Maine’s 1st District, committee staff found that the average prices Maine senior citizens pay are 72 percent higher than those paid in Canada and 102 percent higher than the averages prices in Mexico. Same companies, same drugs, very different prices. It is a form of cost-shifting that Maine seniors – seniors nationwide – no longer can afford.

President Clinton will have a hard time expanding Medicare to pharmaceuticals as he tries to solve its apparent future insolvency. But health-care-funding problems are all linked; patients, doctors, hospitals, insurers all feel the pressure of rising prices and increased competition. The president’s first attempt at health-care reform failed spectacularly, but a reform of Medicare could serve as a template for a larger overhaul of how Americans pay for health care.

Pharmaceutical costs should be part of that plan.