An Empty Drug Aid Plan

President Bush’s announcement last week of a plan to provide prescription drug coverage to elderly Americans with incomes below about $20,000 was smart politics, showing concern for seniors and meeting his campaign promise to introduce a prescription drug reform right after education reform.

But is it a good plan? Health policy experts across the political spectrum say no, because it would saddle states with impossible management burdens and is modeled on historically disastrous private-sector efforts to provide Medicare benefits.

Dubbed “An Immediate Helping Hand,” Bush’s plan would give states $48 billion over four years to help the neediest elderly. However, far from being immediate, it would require states to set up full-blown bureaucracies to design and manage the new drug benefits. Fewer than 1 million people are currently enrolled in state-managed drug benefit plans. The lion’s share of the enrollment is in three states--New York, New Jersey and Pennsylvania--but even these pioneers have reached only one out of four of the low-income seniors they targeted.

States are notoriously slow to establish new health benefit programs--Texas, for instance, took more than three years to implement its version of the federal Children’s Health Insurance Program (CHIP) even though the program was basically an expanded version of existing Medicaid coverage. Moreover, many states might decide against even applying for the new federal funds for fear that when the program expired in four years they would be stuck with an unfunded new entitlement.

The plan’s biggest flaw is its assumption that private insurers will want to manage the new drug benefits the states set up. Its model is Medicare HMOs, which were once seen as the hope for the future of Medicare, a way to control costs while expanding benefits. In the last three years, however, scores of HMOs have pulled out of Medicare, stranding nearly a million people last month alone.

Congressional leaders from Sen. Edward M. Kennedy (D-Mass.) on the left to Sen. Charles E. Grassley (R-Iowa) on the right were quick to criticize the Bush plan as being too limited. Clearly eyeing the 2002 election, they asserted that any new prescription drug benefit should be universal, available to all Americans. However, the legislators failed to expend any political capital suggesting how to pay for such a generous benefit.

The most cost-effective way of promptly delivering a new prescription drug benefit would be to expand the existing Medicare system, not depend on private insurers. By allowing the federal government to buy drugs in bulk, Congress could negotiate down their costs using tools whose success has been proved in Australia, Canada and many European nations.

Bush, who released his drug plan without a press conference, clearly did not want to spotlight a reform he knows would be difficult to implement. But with prescription drugs clearly the fastest-growing health cost in the United States, and with Americans increasingly seeing them as a basic health care right, Congress should at least craft a more practical plan and challenge Bush to accept it.