Who Has the Right Prescription for Medicare?

Paired commentaries by David Kendall of the Progressive Policy Institute and Grace-Marie Arnett of the Galen Institute, both Consensus Group members.

View from David Kendall, Senior Fellow for Health Policy at the Progressive Policy Institute.

Only Nixon could go to China because he was a Republican with anti-communist credentials. And only Democrats can reform Medicare because they created it. Thankfully, Republicans are no longer talking about letting Medicare wither on the vine. But the GOP is still less interested in reforming Medicare than they are in neutralizing the Democrats’ natural advantage on the issue.

Medicare is outdated and badly in need of reform. When it was enacted in 1965, prescription drug coverage was not commonplace as it is today. Private health plans have evolved. Medicare is frozen in time.

Medicare is less innovative because it makes little use of competition. For Americans under 65, private plans compete by adding valuable benefits. For Medicare, a new benefit requires an act of Congress.

Both Vice President Gore and Governor George Bush have proposed to inject more competition into Medicare and add a prescription drug benefit. The difference is how they would do it.

Vice President Gore would first add a drug benefit and then inject more competition. He would make drug coverage available to all Medicare beneficiaries through the traditional Medicare program. Then he would bring in more private plans to compete and also offer a drug benefit.

Gov. George Bush has proposed the reverse: competition first, then a drug benefit. He would wait for the creation of a competitive system to add a drug benefit.

That’s why Gov. Bush has proposed a stop-gap measure. He would give state governments federal dollars to pay for the drug costs of low-income elderly.

Unfortunately, this stop-gap measure has the potential for diverting attention from the need for real Medicare reform. If anything had passed the GOP controlled Congress this year, it would have been this stop-gap measure, not real reform.

Ideally, a drug benefit and competition would go hand in hand. That’s the position of a bipartisan group in Congress led Democratic Sen. John Breaux and Republican Sen. Bill Frist. Their proposal avoids the charges that Gore’s plan would put price controls on drugs. And unlike Gov. Bush, who supports an earlier version of their plan, Breaux-Frist guarantees that all beneficiaries could have a drug benefit without switching to a private health plan.

This bipartisan group holds the balance of power in Congress, and if elected, Vice President Gore will have to move in their direction to get reform enacted.

It is easy for Gov. Bush to blame the current Administration for not getting the job done. But Medicare reform clearly got tangled up in the impeachment process and election year politics.

President Clinton has recently admitted that the Lewinsky scandal and the ensuing attack by Republicans cost him the opportunity to do reform. The liberal flank of the Democratic party is opposed to competition in Medicare, and the President did not challenge them because he needed their votes to save his Presidency.

Vice President Gore still has the opportunity for change. He has proven his commitment to Medicare by fighting to strengthen it. He is well-positioned to lead Democrats through what will be a difficult, but necessary debate about reform. After all, Republicans can start the debate about reform — and deserve credit for doing so — but Democrats have the power to stop it.

Make no mistake. Gov. Bush may sound like a reformer, but if you want actual changes, you need to vote for Vice President Gore.

View from Grace-Marie Arnett, president of the Galen Institute, a health policy research organization based in Alexandria, VA.

Gov. George W. Bush has taken a courageous, although politically risky, approach to providing a prescription drug benefit for Medicare. He acknowledges that Medicare is in dire need of modernization, but instead of tacking an expensive, bureaucratic new program onto this creaky program, his proposal would integrate a drug benefit into overall Medicare reform.

Bush also acknowledges that some seniors need help right now with their drug costs. He would provide federal subsidies next year to help lower-income seniors through a system of state programs that can more efficiently target and administer the benefit. And finally, his Medicare reform plan would assure all seniors they would be protected against medical costs, including prescription drugs, that exceed $6,000 a year. This is a uniquely American cure that can be implemented without crippling research or robbing seniors of choice and the benefits of a competitive marketplace.

This is opposed to the approach taken by Vice President Gore that would add an expensive new drug benefit to the existing Medicare program. Far from advancing reform, this move would halt reform in its tracks. And seniors would suffer. Although Gore says otherwise, Medicare inevitably would control the availability of drugs just as it now controls when, where, and how seniors can obtain other health care services.

Medicare managers soon would develop complex lists of permitted drugs and eventually impose limits on how much it would pay for the drugs. And this would wind up crippling the research that provides the drugs seniors are so desperate to get.

Bush recognizes the pharmaceutical industry must be free to conduct research without constraints of price controls and restrictive government formularies. The army of men and women devoting their lives to medical research must be free to continue the war on cancer, diabetes, heart disease and other life threatening illnesses without political intervention.

This sharp difference of vision matters. Forbes magazine recently reported on new research in cancer biology that would trigger the switch inside cancer cells that tells them to die. This revolutionary research could support and even replace radiation, chemotherapy, and surgery and make them seem as barbaric tomorrow as blood leeching does to us today.

But these breakthroughs won’t come if the pharmaceutical industry’s $26 billion in annual research investment is choked off by Gore’s poorly conceived prescription drug benefit.

France provides a chilling example. France strictly regulates both manufactures’ prices and retail margins. It is no coincidence that, of the drugs developed globally between 1975 and 1994, France is at the bottom of the list with only 3%. By contrast, the United States with its free market system produced 45% of new drugs.

What a mistake it would be if the “Greatest Generation” that won World War II and the Cold War were to leave us with a legacy of a new government-run drug benefit program that dries up the research that has given them added years of life.

If we want this new century’s medical miracles to be discovered, the private research industry needs to be supported and not attacked by government. Medical miracles come through hard work, risk, and protections of intellectual property. Bush’s policy initiatives look to the future with a vision of these extraordinary possibilities.


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