Editorial for Friday — November 28, 2003

• A bitter pill

A bitter pill

There are two things you should know about the Medicare reform bill that passed Tuesday but probably don’t – even if you’ve closely followed the debate.

One is a lot of the money will go to insurance companies and HMOs. About $400 billion will be made available over 10 years to help seniors buy prescription drugs, of which at least $125 billion goes to big insurance firms, managed care companies, hospitals and doctors.

The other thing is that the program may be good enough for members of Congress to pass it for other people, but it’s a lot less than what they want for themselves. In July, Congress quietly stipulated that the value of drug benefits for federal retirees – including members of Congress – can’t be reduced to the level proposed for Medicare. Bad form.

The conservative Republicans who wrote this bill believe private companies can deliver health care cheaper than the government. Many private insurance companies disagreed, and experience has borne them out. Competition has failed to curb health care costs in the private sector; Medicare is also one of the most efficient and successful entitlements. In order to get insurance companies to participate, backers of the bill agreed to overpay them. On average, those companies will get 109 percent of Medicare’s cost. They also get a guarantee that payments won’t drop below what the government spends on people in traditional Medicare.

And there’s even more money for private companies now running Medicare HMOs. Those HMOs are already paid more than traditional Medicare’s cost, yet their patients are, on average, healthier (and therefore cheaper to treat) than those in traditional Medicare. Still, the companies say without the increase, they’ll drop the Medicare plans.

Then there’s the $86 billion in direct payments and tax breaks for big corporations that now provide health coverage to their retirees. The idea is to get them to continue to underwrite that cost. It may help for a while, but not for long. At least one in five companies that offers retiree drug coverage plans to drop that benefit in the near future; 85 percent of such companies plan to shift more of the expense onto retirees, according to a recent survey for the nonpartisan Kaiser Family Foundation.

Those are all questionable ways to save money, which is what Medicare reform was supposed to be about. Even more outrageous is the bill’s sop to pharmaceutical companies; it prohibits the federal government from negotiating the lowest possible drug prices – something private companies, state governments, even the Veterans Administration do now.

So, to recap: Big pharmaceutical companies get exactly what they wanted in the bill. Insurance and managed care companies get a chance to make money. Hospitals and doctors get higher reimbursements. Corporations get more than they asked for. But for the millions of elderly and soon-to-be-elderly Americans who will get, at most, 22 percent of their drug bills covered over the next decade, it’s a bitter pill.

St. Louis Post-Dispatch