Foxes in the Medicare Henhouse?

The historic Medicare legislation which narrowly passed the House on Nov. 22 and the Senate on Nov. 25 was supposed to fulfill the pressing need, and the persistent campaign pledges, to add a prescription drug benefit to Medicare. What was passed, however, is a bonanza to the drug and insurance corporations, covered up with the fig leaf of an inadequate benefit. The new law represents a fundamental shift in the philosophy of Medicare, one of America’s bedrock social contract programs. It begins to take control of Medicare out of the government and starts giving it to private industry — which will ultimately decide what benefits to provide at what price and at what level of profit. It puts insurance companies largely in charge of the new drug benefit, and it begins a major “pilot project” of privatizing traditional Medicare, by forcing it to compete with private insurance in six cities beginning in 2010.

This change is hailed by some as giving Medicare badly needed “modernizing” and bestowing upon it the efficiency and cost-control of the private insurance industry. While Medicare does need updating in certain respects, this is not the way to do it. First of all, the assumptions happen to be totally wrong, as has been clearly demonstrated by the track record to date with Medicare HMOs. Congress and the media have unfortunately swallowed the insurance industry’s claim that managed care saves money. The actual experience, especially for Medicare, shows the contrary: It costs more money, not less. Medicare’s administrative overhead is 2 percent to 3 percent, compared to private insurance’s 12 percent to 25 percent. It also shows, as documented by the General Accounting Office, that the industry is intent on “cherry-picking”: enrolling only healthy seniors and avoiding the sicker ones who generate the bulk of Medicare expenses. This is against the very concept of insurance, which is to have the largest pool possible to spread the risk. The insurance companies are reluctant to include everyone because it hinders their desire to maximize their profits and leave the largest expense for the taxpayers.

The new law includes a needed reimbursement raise for rural health care providers, but this will be undermined by eventual privatization, since rural areas are less profitable for insurance companies.

While the new law provides limited drug coverage for many seniors, it also will make it worse for others: Many who have employer-based coverage will lose their benefits. Some low-income seniors on Medicaid will end up paying higher co-pays. Millions of seniors will see no more than 25 percent of their drug costs covered. Worst of all, it provides no curbs on constantly increasing drug prices. The new law fails to authorize importation, which could result in twice as much relief as that provided by the new benefit. It also, amazingly, expressly forbids Medicare to negotiate for lower drug prices, even though the government already does so for Medicaid and the Veterans Administration! The refusal to limit drug prices will quickly erode the drug benefit, causing coverage to shrink over time. Its sole purpose is to protect the outrageous profits of the drug industry, against the taxpayers’ interest. This is not so surprising, if you remember that the drug companies were the largest contributors to the campaigns of the president and many members of Congress. The campaign “investments” of the drug and insurance industries are paying off, in spades.

This is not a Republican versus Democrat issue so much as a conflict between the drug and insurance industries on one side, and the taxpayers, seniors and disabled on the other. There is a basic contradiction between having health care at an affordable price, and the insurance and drug industries’ obligation to their stockholders to make as much profit as possible off of everyone’s illnesses. This conflict will not go away until all of American health care, including Medicare, is changed into one universal, comprehensive, public health insurance system.

Some have expressed surprise at AARP’s support for the new law. This is not hard to understand, given that 25 percent of AARP’s revenue comes directly from its insurance business, and an additional 35 percent comes from indirect revenue from insurance companies and other corporations. Many AARP members are therefore feeling betrayed.

The Greater Minnesota Health Care Coalition is committed to continue to fight for fair drug prices and universal public health care coverage, for all citizens of all ages.

Posted in News.