Critical Point for Drug Plan

Now that the House and Senate have each passed a Medicare drug benefit, President Bush has said he wants a unified bill he can sign before the August congressional recess. However, even GOP legislative leaders acknowledge that too much haste could produce a bad bill, and questions are piling up around the extremely complex measures.

Both the House and Senate proposals provide about $400 billion over 10 years to Medicare for new drug benefits. Under both, seniors who want to stay in a conventional Medicare plan, choosing and paying their own doctors, could buy separate prescription drug insurance policies. Medicare would also sign contracts with up to three preferred provider plans in different regions of the country, and these managed-care organizations would offer combined medical and prescription drug services for a lower price. The idea is to stimulate price competition. Unfortunately, insurance companies are not chafing at the bit to sign on.

The two bills differ in how benefits are provided and their generosity to various income groups. For many people, especially fairly healthy people, the combination of a monthly fee and high co-payments would provide little or no benefit. In addition, about two-thirds of retirees have drug coverage as a benefit from former employers or as a Medicare add-on, and most are satisfied with it. That means the pool of participants is likely to be both smaller and sicker than envisioned. However, any initial measure is likely to be skimpy, and there’s wisdom in the argument that it’s better to get a small benefit now than to wait for the perfect benefit later. The more immediate issues are cost control and availability.

So far, no insurance company has pledged to sign on to either the House or Senate version of the legislation. The Senate bill tries to guarantee that Medicare itself would provide a drug benefit to anyone who didn’t have private choices. In conference negotiations, the Senate should insist that the House accept this provision.

Neither the administration nor Congress has explained how the country will pay for the new benefit in conjunction with lavish tax cuts. Medicare may become the biggest part of the federal budget within 10 years.

Medicine has changed, with more emphasis on drug treatment and less on hospitalization. No one disputes the need for reforms that provide better drug coverage while reining in costs -- stories of the elderly cutting pills in half to stretch out their supplies are too common. The current bills, however, don’t do enough to harness the power of Medicare beneficiaries to bargain with pharmaceutical companies. Substantially lower drug prices could offer as much benefit to seniors as either of the current bills.

Lyndon Johnson pushed the original Medicare bill through Congress in 1965 by offering nearly unhindered payments to private doctors. Congress is coming close to doing something similar for drug manufacturers today, and the same unintended cost spiral could result. The House-Senate conferees should take a little more time, particularly to give Medicare the power it needs to control prices while it does good.