Medicare reformers could learn from Dirigo

Hearing about the Medicare bill Congress completed this week, I’m struck by how different its approach is from the health care legislation we’ve passed in Maine.

In this last two session, we’ve passed the Maine Rx law, then Healthy Maine Prescriptions, and finally Maine Rx Plus. The goal of all of these programs – enacted over the objections of the pharmaceutical industry – was to give seniors and uninsured Mainers a fair shake on prescription drug prices. We must stop charging the world’s highest drug prices to the people least able to pay for them.

Then earlier this year, we passed Gov. Baldacci’s Dirigo Health plan. This far-sighted legislation has earned national praise for taking on the most difficult problems we have in providing health care coverage to all our citizens. It is designed to provide universal access to quality care, while keeping costs down to ensure we can actually afford the system we’re creating.

Dirigo builds on the successful aspects of our health care system, but also confronts its persistent problems of exploding costs and uninsured citizens. It has three key elements. It uses voluntary, but real price restraint on the part of providers. It makes increased use of federal and state health care dollars to purchase private insurance at market rates for those now uninsured. And it establishes the first statewide health care plan to guide future investments in buildings and high-tech equipment.

It’s the best plan I’ve ever seen for getting the best return on our investment without subjecting the system to arbitrary regulations or cutting fees for doctors and hospitals. It passed with overwhelming bipartisan support.

The Medicare bill, by contrast, takes a completely different approach to cost and access. It takes one of the best-functioning parts of the public health care system and begins to privatize it, but in a convoluted way that will end up undermining its goals. Under its terms, private insurers are supposed to compete with cost-effective government Medicare policies in certain markets – and it tries to make the private plans competitive by providing huge taxpayer subsidies. It’s hard to see how this can keep health care prices down, but easy to see how it will siphon off taxpayer money to private insurers – the same companies now raising premiums at double-digit rates.

The prescription drug benefit is the main reason why Congress considered the Medicare bill this year, and the main reason why some senior groups supported it. But even here, there’s less than meets the eye. The benefits under this plan are so complicated that few analysts can even explain them. There is a major gap in coverage, known as “the doughnut hole,” that most health care economists say is unnecessary. And the bill contains billions of dollars in subsidies for private employers who now offer their retirees prescription drug benefits, under the theory that they’ll drop coverage if Medicare starts covering prescription costs.

I’m not a health care expert myself, but I do know we can’t spend our way out of our health care problems. And that’s what the Medicare bill does. Under its terms, Congress is forbidden to negotiate for lower drug prices, even though we now do that at the federal level for Medicaid recipients, veterans and federal employees. At the state level, programs like Maine Rx Plus are based on price negotiation. We’re not asking for anything not already available to private purchasers like Sam’s Club, yet the Medicare bill would prevent Medicare from seeking reasonable drug prices.

Under this bill, health insurers aren’t asked to do anything to contain prices. Instead, the major “cost containment” in the bill is simply a limit on the proportion of Medicare spending that can come from general tax revenue, rather than Medicare payroll taxes. If that limit is reached, what are we supposed to do? Raise payroll taxes again?

I know that what Congress wanted to do was reform Medicare and provide a major prescription drug benefit. But the process was distorted by some of the same special interests that have far too great an influence over what emerges from the legislative process in Washington. Despite some attractive provisions, this was not the right bill to serve the public interest, and those who rely on Medicare.

There’s reason to believe this may not be the end of the story. The prescription drug benefits in the bill, for instance, don’t even start until 2006. By that time, we’ll have Dirigo up and running – producing many of the benefits promised by the federal legislation, without a lot of its costs. Congress may then want to take another look at what it did. For my money, Dirigo is a lot better investment.

Pat Colwell is the Maine House Speaker.