‘Reforming’ Medicare worse than doing nothing

Something tragic happened on the way to adding a prescription drug benefit to Medicare: The program that more than 40 million elderly or disabled Americans depended upon and trusted for 38 years was sabotaged.

Like most legislation, the Medicare bill was a compromise, producing winners and losers. But in this case, the biggest losers are many of the very people the program is supposed to help, and the winners are health insurance and pharmaceutical industries whose political clout carried the day. American taxpayers are also big losers, because we will be subsidizing these two industries for years to come.

It’s true that Medicare recipients will get some help paying for their prescription drugs. But except for the poorest people and those with very high drug expenditures, that help will be insufficient, and in some cases less than what they now receive. For instance, a senior with an income of $14,000 a year or more who incurs drug costs of $5,000 will be responsible for $3,600 of that sum plus $420 annually to cover the estimated $35 monthly premiums. The gaps and exceptions in coverage are huge and bewildering.

For example, even after the $250 deductible has been met, benefits stop when that individual’s drug costs exceed $2,250 and do not resume until they reach $5,100. Although the recipient is receiving no help with drug costs during this so-called “doughnut hole” in the benefit, he or she must continue to pay the monthly premiums.

Complicated, inadequate benefits, however, are only one of the law’s drawbacks.

Instead of simply adding a prescription drug benefit to Medicare – an established program of predictable and uniform benefits – the new law relies on a hodgepodge of private plans that insurers and HMOs don’t yet even offer. These profit-seeking companies will each decide how much to charge for premiums and co-payments, and which drugs to cover.

Any drug expenses not covered by the plan can’t even be counted toward the deductible or out-of-pocket costs.

Depending on where you live or which plan you choose, benefits and costs could vary enormously. It will therefore be extremely difficult to figure out which one is best (or the least worst) for you. Nor will this be a one-time decision, since the insurer can change benefits, premiums, co-payments, or covered drugs virtually at will, and your medical circumstances can change. And because the law caps federal funding at $400 billion over the next decade, beneficiaries can expect premiums to rise and the “doughnut hole” to grow as drug prices and the number and longevity of people qualifying for Medicare increase.

Taxpayers lose too. Every other large buyer, government or private sector, uses its purchasing power to obtain major price reductions. But the revised Medicare law actually prohibits the federal government from negotiating discounts on the billions of dollars of drugs that will be purchased for Medicare recipients. Instead of using the enormous bargaining clout of 40 million-plus consumers, the new law relies on insurance companies to negotiate on behalf of smaller pools. Lest beneficiaries look outside the United States for relief, the law erects barriers against the re-importation of drugs from Canada.

Had Congress authorized the existing Medicare system to run the drug program, we would be relying on one of the most cost-effective federal programs in existence with no profit motive and with administrative costs that are a fraction of private insurers. Instead, Congress gave the task to insurance companies and HMOs.

By 2006 taxpayers will award these private companies a bounty – 25 percent over the cost of traditional Medicare for the same service – in an effort to entice them to participate.

There are no credible policy reasons for these pharmaceutical and insurance industry giveaways. They simply reflect the political influence of these powerful special interests.

Finally, and most ominously, the new law is a major step toward the dismantling of Medicare as we know it. The law was designed as a first but major step toward moving the entire program – not just drug benefits – to the private sector, eliminating what Medicare beneficiaries value most: a fee-for-service approach that guarantees them the right to choose their own doctors and hospitals anywhere in the country. This flexibility is especially important for the many Maine seniors who spend the winter in a warm climate. In contrast, “choice” under this law’s approach means choice only between insurers. No Mainer has ever told me that he or she would trade Medicare for this illusory choice.

Some of the law’s more reluctant supporters argued that doing something was better than doing nothing. But that is a false premise. We should have waited until we could forge a compromise that preserved and built upon what is best about Medicare: uniformity, equity, universality and reliability. We should have added the one major missing piece in Medicare: prescription drug coverage. Instead, we must now fix this deeply flawed law or live with a devil’s bargain that may haunt us for decades.

Tom Allen is Maine’s 1st District congressman.