LEAVITT: The Medicare veto

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By Mike Leavitt

OP-ED:

Yesterday, the president vetoed a Medicare bill that columnist Paul Krugman calls "enormously encouraging for advocates of universal health care." The battle lines could not be clearer. Any member of Congress who believes in the free market or who takes seriously the need for entitlement reform should vote to sustain the president's veto.

The primary objective of the bill is to prevent a scheduled 10.6 percent reduction in physician payments under Medicare. No one objects to fixing this problem. We support fully reimbursing physicians at pre-reduction levels and fixing the fee schedule formula. Doing so is sensible and unobjectionable - we only wish that it didn't have to be done year in and year out.

What is not sensible or unobjectionable is the rest of the bill, which hurts both taxpayers and Medicare beneficiaries. Driven by election-year politics and a strong ideological preference for government-run health care, Democrats in Congress have loaded this bill with provisions that undermine consumer choice and, worse, pave the way to still more government control of Americans' personal health-care decisions.

First, the bill undermines the very successful Medicare Part D prescription-drug benefit. Part D works when seniors have plenty of choices so that drug plans and companies must compete for their business. Over 85 percent of Part D enrollees say they are pleased with their plans. Average monthly premiums have come in below expectations for three years running, and overall costs have been $150 billion less than originally estimated.

But the Democrats' bill would require the secretary of Health and Human Services to force Part D drug plans to cover all drugs within certain "protected classes" of drugs - for example, all statins used to control cholesterol. This would mean that drug plans could no longer use the threat of exclusion from the formulary to negotiate the lowest possible price for drugs like Lipitor and Zocor. The provision is a windfall for certain drug makers, but a hard pill to swallow for beneficiaries and taxpayers.

The provision would also give drug makers and other special interests a powerful incentive to lobby to have their drugs included in protected classes. Part D would become politicized, and government bureaucrats would begin deciding which drugs will be covered, instead of allowing the free and informed choices of American seniors and the competition of the free market to decide the matter.

Second, the bill lays the ax to the popular Medicare Advantage program, which gives seniors the option of receiving their care through private health plans. Medicare Advantage offers more choices and better care than government-run Medicare, often including preventive screenings that can save them money and help them avoid serious health problems later. It is especially popular with low-income beneficiaries. In fact, 49 percent of Medicare Advantage beneficiaries earn less than $20,000 per year, and many live in rural areas where doctors accepting Medicare patients are hard to come by.

The bill, however, would eliminate many of the options that make Medicare Advantage so popular and would force about 2.3 million Americans from their preferred private plans to the standard government-run Medicare, according to the Congressional Budget Office.

Third, the bill aborts a major money-saving reform for consumers and taxpayers - by effectively killing a new program for the purchase of durable medical equipment (DME). Since the 1980s, Medicare has been paying for DME according to a government-fixed fee schedule. The reform opens Medicare purchases up to competitive bidding. This program is already underway in 10 areas, and it's already saving Medicare and its beneficiaries 26 percent on average. Annual savings are estimated at $1 billion when fully implemented.

I can't explain why some members of Congress think that is a bad deal, except that some seem to believe it's always better to have government set a price, however high, than for the market to decide the matter. The bill would kill the contracts Medicare has already signed with DME suppliers. Adding insult to injury, it would also require my department to spend Medicare Trust Fund money to pay for any damages resulting from the cancellation of those contracts.

When Congress votes again this week on the deeply flawed bill, what is at stake is far more than whether the president's veto will be upheld. What is at stake is whether our country lives under a system focused on one-size-fits-all coverage and price-fixing, or whether it embraces free-market incentives, competitive bidding, and consumer choice.

If we want a health-care system that promotes value - that promotes the highest quality care at the lowest possible prices - Congress simply must do better.

Mike Leavitt is secretary of the Department of Health and Human Services.