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Press Release

    Drugging Medicare

    01/29/2003

    The new political reality is that, very soon, taxpayers are going to start paying for medical drugs for senior citizens. The idea of a drug benefit has a full steam of head in Washington, D.C., after passing the House of Representatives last Congress. That bill was a disaster, and in one stroke would have increased the federal government’s unfunded obligations by a staggering $4 trillion or so. Thankfully, that plan died in the Senate, but the idea has arrived.

    OK, first of all, on one level including drugs in our health care program for seniors makes sense. Drugs are an increasingly important part of medical care, and funding drug treatment will have some immediate benefit to the health care bottom line. In fact, a study by Columbia University economist Frank Lichtenberg found that every $1 spent on newer drugs saved $4 in hospital care. The reason: because prescription drugs are more often used for preventive care, they stave off more debilitating, more costly medical conditions requiring expensive and lengthy hospitalization. While a $600 annual prescription for two leading cholesterol-reducing drugs may seem expensive, it is the long-term effect of those drugs that helps avert an emergency bypass operation and lengthy hospital stay at an average cost of $300,000, according to the study.

    The pharmaceutical companies are, indeed, leading a health care revolution. For example, the Washington Post reports today on Virginia Garner, a teacher in Claremont, California, who takes the new drug Gleevec to stave off her leukemia.

    “Today, Garner's life has been returned to her. She is back in her classroom and spending time enjoying her husband and two dogs. The only reminder of her cancer is the six yellow capsules she swallows every morning with a bowl of cereal or a piece of toast. ‘I feel great. I don't even remember I'm sick," said Garner. ‘I think of it as under control. It's sort of like diabetes. The insulin keeps the diabetes under control. It's like that. It's turned into a disease you can manage. It's a miracle. It's truly a miracle."

    George Bush recognized the power of pharmaceutical drugs in his State of the Union speech last night when he declared that the nation should give “…seniors access to the preventive medicine and new drugs that are transforming health care in America.” It’s fair that poor seniors, who paid into Medicare most of the lives, should have access to these drugs.

    Having said that, it would be folly to pass a prescription drug benefit without passing fundamental reform of the collapsing Medicare program. Creating a naked benefit like the House did last year would only further weaken the entire Medicare system.

    Why? Medicare’s top-down cost control strategy has failed. Medicare pays too much for medical services in some parts of the country and far too little in others. Many doctors now routinely refuse to take Medicare patients. Politically driven decision-making leaves hospitals teetering on the edge of financial ruin, waiting for last minute bailouts from Congress.

    George Bush knows that drugs can save lives and improve the quality of American health care. He also sees that Congress, left to its own devices, will destroy the Medicare system by simply adding a drug benefit to it. Thus, the tactical brilliance of the approach the President proposed in his State of the Union address: passing a drug benefit that exists in a new, parallel Medicare system.

    As the President put it, “Seniors happy with the current Medicare system should be able to keep their coverage just the way it is.” But, to get the drug benefit, a Medicare recipient would join a private insurance or doctor’s group. The result is that the “integrity” of Medicare is maintained, and frightened seniors that don’t want the drug benefit can simply stay in traditional Medicare.

    The creation of a private, parallel version of Medicare will be one of the early battle lines. Tom Daschle (D-SD) drilled in even before the speech: “…the President's proposal is a benefit for HMOs, not for seniors. It essentially will force seniors out of traditional Medicare and into private HMOs if they want to obtain prescription drug coverage.”

    But the idea makes sense, and should result in making Medicare operate more like the successful health program for federal employees. As Bush told Congress last night, “Just like you, the members of Congress, members of your staffs, and other federal employees, all seniors should have the choice of a health care plan that provides prescription drugs.” To get there, he proposes increasing spending by $400 billion to “reform and strengthen Medicare.” The key is to create this parallel system.

    Medicare serves 39 million senior and disabled citizens, so this reforming approach could have a profound and positive impact on American health care as a whole. Bush recognizes that moving Medicare towards private competition has far reaching implications: “Health care reform must begin with Medicare.”

    The Senate, however, will again be an enormous hurdle to real Medicare reform. Already, unlikely groups like rural Republicans are aligning to kill the President’s proposal. Senator Pat Roberts (R-KS) told CQ Today, “I doubt a complete overhaul is possible. I’d rather see us do something on prescription drugs as a first step rather than tie it into a complete overhaul.” Is he reading from Tom Dascle’s talking points? Another bad sign is from Senator Charles Grassley (R-IA), (who is also creating friction against the Bush tax plan) who said seniors in rural areas should be able to buy a government-run drug benefit plan. Can new Senate Majority Leader Dr. Bill Frist reign in these doubters?

    The Bush proposal should have a good hearing in the House of Representatives, but it faces some serious clinical trials in the Senate. Still, today the President offered a bold proposal that attempts to leverage momentum on the drug benefit into real Medicare reform. We’re glad someone is finally trying to take Medicare off of life support.