Prescription for Privatization

Democrats who supported the dreadful Republican legislation for prescription drug coverage under Medicare, which passed the House and Senate in late June, rationalized their support as a case of the camel getting his nose into the tent. In years to come, they suggested, there will be opportunities to improve prescription drug coverage once the principle is established. But the camel that is likely to make the most progress into the tent is not the carrier of prescription drugs. It’s the one bearing the dangerous baggage of Medicare privatization. 

With this legislation — details of which will now be worked out in a House-Senate committee — Bush may undercut one of the most potent issues for Democrats in the next election (since the plan conveniently won’t go into effect until 2006, insulating Republicans from backlash about its shortcomings). Right-wingers in and outside Congress grumbled at the establishment of another ​“entitlement,” but as the price of passage, they exacted even more tax cuts, crippling restrictions on the prescription plan, and the beginnings of privatization. 

The House bill is even worse than the Senate version, and there’s still hope that the legislation will not survive conference compromises. But the legislative history is an argument against the unfortunate prevailing wisdom among Democrats that only incremental change is possible. More incremental change like this will destroy Medicare. Full national health insurance not only is the best policy, but by being clear and understandable, it would be the best politics for Democrats as well — if they had the will to fight for it.

The House and Senate plans share numerous flaws. The average Medicare beneficiary is likely to pay even more for prescription drugs under these plans than currently without any coverage, according to an analysis by the Consumers Union, and only about 22 percent of total senior drug costs will be covered. Except for the large number of seniors with relatively low bills who are likely to opt out, thus pushing up the likely premium costs for participants, the plan will force participants into private plans. Especially in the House version, the legislation would substantially privatize Medicare as a whole around 2010. While there are token gestures toward moderating drug prices, both the House and Senate bills actually prohibit the federal government from bargaining with pharmaceutical companies to get good deals — a proven strategy followed by nearly every other nation and even our own Veterans Administration. The legislation would undermine the universality of Medicare by permitting variations in premiums and benefit packages among different regions and private plans. 

The new legislation would be especially bad for poor people and would likely provide special benefits for the well-to-do. For example, roughly 6 million individuals who are eligible for both Medicaid and Medicare will, unlike under current policy, be primarily covered by Medicaid. This means that their prescription benefits are likely to be inferior to and less predictable than Medicare drug coverage, since the states have much more control and financial responsibility. Also, as a concession to the far right, the House prescription drug bill folds in legislation establishing Health Security Savings Accounts (estimated to cost $174 billion for 10 years compared to less than $400 billion for prescription drugs). These HSSAs, which allow individuals or those with high-deductible employer health insurance to save money tax-free to cover medical costs, are likely to become a tax shelter for the affluent. At the same time, they will encourage employers to shift to high-deductible policies, undermining traditional employer-provided insurance and hurting low-income families. The incentives in the legislation are also likely to lead many employers to drop the prescription drug coverage they now provide their retirees, according to the Congressional Budget Office.

How can Congress stiff seniors under the guise of helping them? How does prescription legislation translate into new tax breaks for the wealthy, more expensive drug costs, and a boon to the private health insurance industry? Clearly it reflects the political interests and strategic cleverness of the Republicans, but it just as clearly reflects the failure of all too many Democrats.