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Undermining the Rx benefit
by Tom Oliphant
Boston Globe
November 24, 2003

THERE WAS ONLY one subject that produced agreement during the long tussle among conservatives and progressives, Democrats and Republicans over how to provide some measure of prescription drug insurance for retired people and the disabled within Medicare.

That subject was the cost of drugs in the United States, something so out of control that it threatens to undermine if not destroy the alleged benefit that will be available to some in about three years.

Said Senator Dianne Feinstein of California, one of those Democrats who decided to support the bill in the end, "There is one significant missed opportunity in this bill, and that is it contains no provisions aimed to control the cost of prescription drugs."

Republican Senator John McCain of Arizona, one of the few conservatives to stick to his principles in opposition to the creation of a major new entitlement program, added that the subsidies to "special interests" like insurance and drug companies stand in stark contrast to the absence of any means of keeping costs from skyrocketing.

In particular, he noted (as did many progressives) a truly bizarre section of the legislation that literally prohibits the government from bargaining over price with the drug companies and other suppliers to beneficiaries. He also noted that this is precisely what enables the Veterans Administration and the core of the Medicare bureaucracy that deals with hospitalization to keep drug prices below what they are in pharmacies for veterans and retired people in hospitals. It is no accident, McCain said, that the profits of drug companies are officially expected to grow by $9 billion as a result of this protection from having to negotiate with the biggest bulk purchaser of them all.

In addition, Senator John Edwards (who joined fellow presidential candidates John Kerry and Joe Lieberman in opposition) noted that the legislation not only puts an insuperable roadblock in front of the re-importation of much cheaper prescriptions from Canada, it also tweaks the antitrust laws enough to enable drug companies to conspire to reduce shipments to Canada in order to reduce the supply available to Americans.

According to Lieberman, there will also be nothing to prevent drug companies from restricting the drugs available on their lists (or formularies) to beneficiaries, something that will limit the options of people now getting drug coverage through former employers or Medicaid. And several senators also noted that proposals to greatly speed up the availability of generic products as a substitute for patented medicines have been greatly watered down.

The result is that drug prices, and this meager program's costs, are certain to skyrocket in the years ahead, undermining its protections.

For a few principled conservatives, this was enough to overcome partisan loyalties. One in particular, retiring Senator Don Nickles of Oklahoma, pointed to an estimate by officials of the Congressional Budget Office that while the program's cost over the next decade is budgeted at $400 billion, an educated guess about the following decade is more like $1.5 trillion. And efforts to fill the legislation's huge coverage gap for the middle class (which is certain to produce anger as the facts become better known) will only add to the burden of a program for which the already hemorrhaging government has made no provision whatsoever.

After he had unconscionably muscled the Republican-written measure through the House early Saturday morning, Speaker Dennis Hastert of Illinois refused to say that 10 years from now retired people will be paying any less for drugs than they are today. He gruffly responded that people who don't like the benefits don't have to participate in the program. There's compassionate conservatism for you.

And yet -- the instinct many progressives felt to make this flawed start was strong.

One proponent, Democratic Senator Max Baucus of Montana, said that one-third of Medicare's beneficiaries will have at least 95 percent of their drug costs covered; he is correct.

Localizing it, another proponent, Democratic Senator Blanche Lincoln said that 40 percent of the beneficiaries in Arkansas will be eligible for reduced or premium-free insurance that has no coverage gaps.

On the other hand, speaking for the forgotten middle-class, Democratic Senator Barbara Mikulski said 200,000 retired people in Maryland will fall into that huge gap that will require them to shoulder thousands of dollars in out-of-pocket costs while still paying premiums. And Senator Edward Kennedy noted that just the imposition of an assets test on poor people will deprive 60,000 benficiaries in Massachusetts (and 2 million nationally) of assistance.

The Senate version of this legislation, with Kennedy's all-important support, got 77 votes last summer. The final version -- with its private industry subsidies and tax breaks for the wealthy added by a stubbornly partisan House -- has eliminated that bipartisan glow.

The resulting program is President Bush's to defend next year. Perhaps that is why its woefully inadequate provisions are not due to take effect until 2006. The reality will spawn waves of anger; what remains to be seen is if the clear prospect will as well.

Thomas Oliphant's e-mail address is oliphant@globe.com.

Copyright 2003 Globe Newspaper Company.

Posted: December 5, 2003


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