Promise and a Pot of Cash

Congress made all sorts of promises over the past several years about adding a prescription drug benefit to Medicare and got nowhere. Public skepticism was reinforced last Thursday when Senate Republicans defeated a Democratic proposal to add an outpatient drug benefit to the federal program for seniors and the disabled. But President Clinton made it clear Saturday that he would not give up, proposing an even more comprehensive plan than Democrats put forth earlier. There are reasons to hope for progress this week as the full House of Representatives begins debating the issue.

Most Americans 65 and over don’t have drug coverage because it’s not part of Medicare and the drug insurance policies that exist are wildly expensive. Seniors buying outpatient drugs on their own also pay a high price--on average 20% more than what employer-provided drug coverage plans pay. In too many cases, seniors’ drug costs reach hundreds of dollars a month; some have to give up or reduce lifesaving medicines.

For the first time, both political parties in Congress agree that a separate Medicare drug benefit is the right way to address these fundamental problems. Also, for the first time a big pot of money, $40 billion so far, has been set aside to begin subsidizing a benefit.

Democrats and Republicans would both require a monthly premium payment, both would pay half of drug costs up to a certain amount and both would pick up all drug costs above a “catastrophic” out-of-pocket limit: $4,000 in the Clinton plan, $6,000 in the GOP plan. Both sides have hinted at compromise on the benefit numbers. In any event, both plans would be likely to cost more than their proponents claim.

The real sticking point is over design. The Clinton plan would cover all Medicare beneficiaries, and the GOP prefers a voluntary system. House Speaker J. Dennis Hastert’s (R-Ill.) plan would funnel most of the $40 billion through the “Medigap” add-on insurance programs now offered by private insurers. Unfortunately, Medigap plans have been models of inefficiency, with high administrative costs and little experience in negotiating with drug manufacturers. Instability would be guaranteed: Insurers could enter and leave the market and change benefits from year to year. And because the GOP plan is voluntary, sicker people would inevitably sign up first, boosting the per-person cost.

Other problems with Hastert’s plan were summed up last week by Rep. Greg Ganske (R-Iowa), a surgeon by profession: “If you let plans design all sorts of benefit packages, as does the GOP plan, it becomes very difficult for seniors to be able to compare . . . equivalency of plans in terms of value. I also think that plans can tailor benefits to cherry-pick healthier, less expensive seniors and game the system.” Even representatives of the insurance industry have expressed doubts about the GOP plan.

A better approach would allow Medicare to draw up a uniform, defined-benefit package, periodically negotiating the best price for that package with private-sector providers. Clinton’s single universal plan comes close to that, and some House Republicans like Ganske support the concept.

Politics and cost may still prevent a comprehensive drug benefit plan this year. But Congress could at least move to bring more fairness into the system. For example, Ganske rightly called on Congress to consider a bill by Rep. Thomas H. Allen (D-Maine) that would allow pharmacists to buy drugs for Medicare beneficiaries at the best price available to the federal government--typically one negotiated with the drug companies by the Veterans Administration or Medicaid. The drug companies, reaping record profits, reject the idea. But this simple reform involves zero bureaucracy and would give Medicare patients the same good deal that millions of others get.