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Medicare
New Drug Benefit Challenged
By Anita Kumar, St Petersburg Times
October 19, 2005
Two years ago a divided Congress reluctantly approved a prescription drug plan for millions of elderly and disabled Americans after getting assurances the cost would not exceed $395-billion over 10 years.
But just a few months later that number ballooned to $534-billion. Earlier this year, it shot to $795-billion. It's not expected to stop there.
Now, with the program about to begin enrolling patients, some members of Congress are using the skyrocketing cost to renew their calls to postpone or scale back the Medicare drug benefit. Some want to kill the program altogether.
It's unlikely the opponents will succeed, but the arrival of the long-awaited Medicare prescription drug program offers a prime example of how some politically charged debates simply never end.
The government is facing unprecedented - and still uncertain - expenses from Hurricane Katrina, making opponents to the costly drug benefit more vocal than ever in their efforts to stop it before it starts Jan. 1.
"It's revitalized the movement," said Mike Tanner, a Medicare expert at the libertarian Cato Institute, which opposed the bill in 2003. "There really is a revolt growing."
The drug benefit represents the largest ever expansion of Medicare, one of the government's most popular programs since it was created in 1960. Almost 42-million people elderly or disabled - no matter their income - will be eligible to enroll in one of dozens of programs offered by private companies that will be subsidized by the federal government. Each program will have its own premiums, its own list of covered drugs and its own network of participating pharmacies.
The voluntary program, known as Medicare Part D, is both an insurance program that is supposed to protect against high drug prices and a discount program for all types of prescriptions. A six-month enrollment period begins Nov. 15.
President Bush, who spearheaded the proposal through Congress and often calls it one of his greatest domestic achievements, has threatened to veto any changes to the plan by Congress. As he faces discontent over soaring gas prices, federal hurricane response and his Supreme Court nominee, Bush needs the drug benefit to proceed smoothly. Democrats are watching closely for any problems.
And Republican leaders in the House and Senate said before heading home for their weeklong recess that they refuse to revisit the Medicare drug benefit.
"We're completely on track for an on-time implementation," said Dr. Mark McClellan, the administrator of the federal Centers for Medicare and Medicaid Services.
"I absolutely agree with the view of taking federal budget costs down but there is a much, much more effective way than to block aspects of modern medicine."
In recent weeks, government workers and private companies have spread out across the nation to encourage recipients to begin researching the myriad options. The Bush administration recently announced that aggressive competition among the private companies has lowered the average premium to an average of $32.20 per month, about $5 less than previously estimated.
After years of debate and months of negotiations, Congress narrowly passed the 678-page bill in 2003. The House approved it only after Republicans leaders extended a 15-minute vote for an unprecedented three hours before dawn while persuading enough members to change their minds.
"If this thing came up today it wouldn't pass. There's buyers' remorse," said Robert Moffit, director of the Center for Health Policy Studies at the Heritage Foundation. "They're running out of politically viable options. They have to figure out how to pay for all this."
Democrats complained that the program offered too little and cost seniors too much while providing a financial boon to pharmaceutical manufacturers and private health plans. Fiscal conservatives worried the government was creating an expensive new entitlement program that it could not afford.
The federal deficit decreased from the second quarter of last year to the second quarter of this year, from $413-billion to $281-billion. Bush vowed before Katrina hit to cut the deficit in half by promoting economic growth and keeping spending under control.
"The deficit was heading south," said Peter Morici, a professor at the University of Maryland's School of Business. "Now this is going to take it in the other direction."
The Republican Study Committee, a group of conservative House members, created "Operation Offset," a list of cost-cutting proposals equal to $500-billion in 10 years. The list includes eliminating members' pet transportation projects and cutting NASA's Moon and Mars Initiative, but most attention has been given to scaling back the drug benefit.
Rep. Jeff Flake, R-Arizona, who already had introduced a bill to postpone the program for a year to save $30-billion to $40-billion, is now calling for a two-year delay for higher-income Medicare recipients.
Sen. John McCain, R-Arizona, is expected to introduce a similar bill as soon as this week.
"Many of us thought before Hurricane Katrina that we couldn't afford this benefit," Flake said at a recent news conference. "Certainly today, we have to think that we've got to put off this benefit. We simply can't do both."
Lawmakers spent much of the year debating whether to revamp Social Security but experts say Medicare's financial woes are far greater, partly because of the drug benefit.
Medicare, the third-largest government expense behind defense and Social Security, amounts to almost 12 percent of all federal expenses. That number will only rise as the plan begins, and again as baby boomers turn 65 and become eligible for Medicare in 2011.
The Congressional Budget Office originally estimated the cost of the plan at $395-billion from 2004 to 2013. But later, news reports said the White House knew the cost would be much higher but did not disclose the figures until after Congress voted.
Now some estimates put the price tag as high as $1.2-trillion, though savings would reduce it to $720-billion from 2006 to 2015.
Experts say the varying totals are the result of the differing assumptions used in calculations on a variety of simple but important unknowns, such as the number of people who will sign up for the program and the number of low-income people who will need special assistance.
But the Bush administration attributes the bulk of the rising discrepancy to a fact of the calendar. In 2003, the 10-year cost estimates included the two years - 2004 and 2005 - before the program was to begin so there was no cost at all. Now, the 10-year cost projections begin in 2005 so they are necessarily higher because there are expenses in every year.
Some have argued money could be saved if the government used its leverage as a single purchaser of drugs to negotiate directly with drugmakers - perhaps $190-billion over the next decade. Instead, competing private plans negotiate price with the drug companies.
"There are hundreds of different plans," said Ron Pollack, executive director of the consumers' group Families USA. "But none of them have the bargaining clout Medicare would have had."
Authors of the law rejected the idea of using Medicare to negotiate because they worried that too much government involvement could overwhelm the free market, leading to federal regulation of drug prices or price-fixing.
The dispute over the cost is not expected to end any time soon. Though a delay appears to be unlikely this year, some are hoping the recent wave of discontent will fuel changes next year that will lead to more benefits and lower prices for consumers, such as allowing the importation of Canadian drugs or filling in gaps in coverage.
"Over time the demand for that kind of change will grow enormous," Pollack said. "We are going to see change at some point - maybe after President Bush has left office."
Times researcher Angie Drobnic Holan contributed to this report.
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