Medicare hypocrisy

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What's wrong with the new Medicare bill? Nothing that a little honesty couldn't cure. A recent Wall Street Journal article suggests that the problem is not so much the substance but the failure of Republicans to rise up in defense of the measure. Since the day the bill was passed, Democrats, labor unions and seniors from retirement villages have been holding rallies and press conferences to scream about how the law is either "scamming" seniors or cheating them out of more generous private-sector coverage in order to pay off "Big Pharma and insurance companies."

They are also annoyed that the drug benefit only pays for half of all drug costs and begins two years from now -- not immediately. They want the pharmacy benefit management companies in the law to be replaced by Medicare price controls and a national drug list. Some disgruntled Republicans aren't helping matters much by saying "I told you so" after learning that the Bush administration's estimate of adding a drug benefit to Medicare exceeded the Congressional Budget Office (CBO) number by more than 25 percent.

To paraphrase Mark Twain, let's get the facts straight and then distort them as we please. As an article in Health Affairs reports, the president "proposedanoutpatient prescription drug benefit to be offered under a new voluntary Part D of Medicare ... Medicare would pay half the cost of covered drugs ? The drug benefit would be administered by a [private] pharmacy benefit manager." To help seniors maintain more generous private-sector coverage, "the president's proposal had incentives for employers to keep [drug coverage]. Medicare would pay employers 67 percent of the premium subsidy costs it would have incurred if retirees had enrolled in Part D instead."

Sound familiar? This proposal was supported by virtually every Democrat. But it wasn't President Bush's plan; it was Bill Clinton's. And it had three big differences. First, it was scheduled to kick in four years after it was to pass in 1999, not in two as the Bush plan anticipates. Second, it covered a lot fewer people. And third, the Clinton plan didn't cover catastrophic drug spending; it capped government spending at about $2,500 per senior with some adjustment for inflation. The Bush plan covers all drug costs over $3,000 a year.

They are similar in one important respect: the estimated costs of both plans were revised upwards by about 25 percent for the same reasons. The Health Affairs article on the Clinton plan, which was written by CBO analysts, noted that theCBO"estimateof Medicare costs for the drug proposal was about 24 percent higher than the Clinton administration estimate." The main reason for this difference is that the CBO "assumed a higher annual rate of growth for drug costs in the future."

Contributing factors included increased utilization because "new low income subsidies would eliminate out of pocket costs" and because the new drug plan would "offer a more generous drug benefit package than standard Medigap plans now do, and at a lower premium." Finally, "people [who] received Medicaid benefits under the proposal also would enroll in Part D because states, which are responsible for their drug costs, would sign them up for Part D to reduce their Medicaid expenditures."

Not surprisingly, these are the very same reasons that the Bush administration had for coming up with an estimate that was about 25 percent higher than the CBO estimate of $400 billion for the Bush drug plan. The Medicare actuaries used almost the exact same language as the CBO analysts in coming up with their estimate. They noted that estimates are highly uncertain because "the effects of the new benefit on the behavior of beneficiaries, physicians and employers are difficult to predict ... projecting future drug spending is highly speculative even without newcoveragebecause spending depends partly on the rate and direction of technical change which cannot be accurately foreseen."

It took 30 seconds to track down the Health Affairs article. It would take even less time to hunt down the speechifying of Sens. Ted Kennedy, Tom Daschle and John Kerry praising the Clinton plan, which is the Bush bill, albeit with less money for seniors, less choice and a longer waiting period before receiving benefits. Today, Democrats seek to repeal a measure that is exactly like the one they supported less than four years ago. Why haven't Republicans made more of this hypocrisy, and why hasn't the media asked Democrats to explain why the 25 percent difference in estimated drug spending wasn't a giveaway to private companies in 1999 but is now?

Robert Goldberg is director of the Manhattan Institute's Center for Medical Progress.