[Mb-civic] Drug Benefit Disaster - Robert J. Samuelson - Washington Post Op-Ed

[William Swiggard]

Drug Benefit Disaster

By Robert J. Samuelson
Wednesday, November 23, 2005; Page A19

Good policy can make for good politics, and bad policy can make for bad 
politics. Republicans may be about to discover this truism with their 
Medicare drug benefit, passed by Congress in 2003 and scheduled to take 
effect in January. As policy, the drug benefit is a calamity. It worsens 
one of the nation's major problems (paying baby boomers' retirement 
costs) while addressing a nonexistent "crisis" (allegedly oppressive 
drug costs for retirees). Its purpose was mostly political: to bribe the 
elderly or soon-to-be-elderly to vote for Republicans in 2004. Now it 
may backfire on Republicans.

Sometimes it's hard to give away money without making people angry. They 
figure you should give them more, or they dislike your terms. Here, 
Republicans created grief for themselves. They rejected a simple add-on 
of drug coverage to Medicare. Instead, they preferred a "market-based" 
system that has private insurance companies offer plans that are, in 
turn, subsidized by Medicare. Congress set a minimum benefit (including 
a $250 deductible and 25 percent premiums on coverage up to $2,250) and 
invited insurers to provide that plan or something "actuarially 
equivalent." The result: many plans -- and much confusion.

In 46 states, Medicare beneficiaries can choose from at least 40 plans, 
reports the Kaiser Family Foundation. People feel overwhelmed. It's hard 
to compare plans, which often cover different drugs and have varying 
deductibles and premiums. One monthly premium is $1.87, another $99.90. 
A survey by Kaiser confirms the bafflement: Only 35 percent of Medicare 
beneficiaries say they understand the drug benefit "somewhat well" or 
"very well"; a dismal 61 percent say they understand it "not too well" 
or "not well at all."

For Republicans, there's a second political problem -- outrage among 
conservatives over the new spending and the biggest expansion of 
Medicare since its creation in 1965. From 2005 to 2015, the drug benefit 
will cost $858 billion, estimates the Congressional Budget Office. 
Similarly, many conservatives ridicule the role of private insurance 
companies. "This is not a market-based system. It's central planning," 
says Robert Moffit of the Heritage Foundation. "You have red tape and 
bureaucracy" -- all the rules and subsidies that regulate the insurance 
plans.

Republicans deserve the backlash, because their motives were so 
blatantly political. President Bush embraced congressional demands for a 
big drug benefit from, among others, House Speaker Dennis Hastert. The 
speaker "was pushing for a program that wouldn't just apply to poorer 
seniors," says John Feehery, Hastert's former press secretary, referring 
to Bush's original plan. "Medicare has always applied to all seniors. 
That's the political reality. They are the people who vote." To be fair, 
Democrats groveled with equal abandon; their drug plans were generally 
costlier.

Whether the Republicans' bribe initially succeeded is unclear. Among 
voters 65 and over, Bush beat Kerry in 2004 by 52 percent to 47 percent, 
a five-percentage-point gain over 2000 but close to his overall victory 
margin (51 percent to 48 percent). In the House, the Republican majority 
increased slightly. But the drug plan's features confirm its political 
nature. First, Republicans declined to pay for it; most costs (literally 
trillions of dollars) must be covered by borrowing or future tax 
increases. Second, there's the "doughnut hole" -- the standard benefit 
provides coverage up to $2,250 of drug costs and then no coverage for 
the next $2,850. Of course, this makes no sense as health or social 
policy. The purpose was political: to provide benefits for lots of 
people while limiting total costs.

The justification for a broad drug benefit was always flimsy. When 
Congress passed it, about three-quarters of Medicare recipients already 
had drug coverage. The poorest had it through Medicaid, many retirees 
had it from their former employers and some had it through Medicare 
managed-care plans or private insurance policies they purchased.

For Medicare recipients, all out-of-pocket costs -- including drug costs 
-- have remained remarkably stable. In 2001 they averaged 9.9 percent of 
income; the comparable figures for 1977, 1987 and 1996 are 8.1 percent, 
9.4 percent and 8 percent. In 2002, 55 percent of Medicare recipients 
had out-of-pocket costs of less than $1,000; another 26 percent were 
under $2,499. Drug costs are oppressive mainly for a small minority of 
uninsured poorer recipients with large bills.

Mark McClellan, the doctor and economist who runs Medicare, thinks that 
understanding of the drug benefit will increase and that perhaps 30 
million of Medicare's 43 million recipients will gladly sign up. 
Perhaps. But it may be that the program's complexities intensify 
resentment. Some commentators (including me) have suggested repealing 
the benefit. That would be good policy, because it would cut wasteful 
spending and allow drug coverage to be included in a major Medicare 
overhaul that focuses on the neediest and curbs costs. With hindsight, 
Republicans may someday realize that it also would have been good politics.

http://www.washingtonpost.com/wp-dyn/content/article/2005/11/22/AR2005112201583.html
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