Texas-Sized Ideas

This article was originally published by The New York Sun January 13, 2003.


President Bush is thinking big! In his speech to the Economic Club of Chicago last week, he surprised almost everyone with the size and boldness of his tax cut proposals. And when he delivers his State of the Union address on January 28, all of the signals indicate that the president’s plans for health reform also will be Texas-sized.

The White House continues to send strong signals that the president is determined to put his energies behind modernizing the decrepit Medicare program. House Republican leaders nearly lost control of Congress over “Medi-Scare” in 1996, and the White House and congressional leaders are convinced it requires presidential leadership to make progress on streamlining and improving the program.

There has been a revolution in the ability to treat illnesses through effective pharmaceuticals — true wonder drugs that can extend and improve the lives of millions.

But the Medicare program, established in 1965, has not kept pace with modern medicine’s advances and (with rare exceptions) does not provide coverage for outpatient prescription drugs, even though nearly all private health plans do.

The White House insists it would be irresponsible to tack a prescription drug benefit on to a program that is facing trillions of dollars in unfunded liabilities. Ideally, Medicare beneficiaries would select from among competing private health plans, each offering comprehensive health benefits, including prescription drug coverage.

The president plans to offer more choices of private plans for Medicare beneficiaries with prescription drug benefits available to all and special subsidies for lower-income beneficiaries.

The last two Congresses have tried but failed to enact drug legislation. The House passed legislation in 2000 and again in 2002 that would have provided a structure for competing private plans to offer a drug benefit. The Senate considered four different bills last summer but deadlocked, unable to produce a final bill.

The House can be expected, once again, to pass legislation in this session creating a Medicare drug benefit. But all of the cards remain in the hands of the closely-divided Senate. It will take 60 votes for any bill to pass, and members are jockeying to forge bi-partisan compromises to meet this test.

The Wall Street Journal editorialized this week that “Republicans tend to approach health care policy the way the rest of us do a root canal,” but that is thankfully changing.

The White House is motivated because officials believe the 2004 elections could well swing on health care issues. And the president is emboldened because, for the first time, the leadership on Capitol Hill is passionately committed to health reform.

Senator Bill Frist gave up his post at the National Republican Senatorial Committee to devote his time and energies to health issues, long before he or anyone else had the slightest notion that he would soon become Majority Leader. Dr. Frist has been a leader in introducing and promoting legislation to streamline Medicare through private-sector competition.

House Speaker Dennis Hastert, Ways and Means Chairman Bill Thomas (R-CA), and Commerce Committee Chairman Billy Tauzin (R-LA) are even more experienced on health care and equally determined to make progress on free-market reform. The bill they wrote and passed last year encouraged the creation of private competing drug plans, overseen by Washington, with the government serving as reinsurance agent for large drug expenses.

The right way to institute a drug benefit is to make it part of an overall health plan, like virtually all plans in the private sector. But few members of Congress campaigned on the issue of Medicare modernization, and the first constituency that the president will have to convince to go along will be rank and file members of his own party.

The debate will inevitably become contentious and politicized. Democrats already have introduced legislation this year that would simply add a drug benefit to be run like the rest of Medicare, with prices set by Washington and drugs restricted to those approved by government.

There is, however, another option. The Galen Institute, together with Joe Antos at the American Enterprise Institute, have developed a proposal called the Prescription Drug Security (PDS) plan that is gaining a great deal of attention from political leaders.

The Prescription Drug Security (PDS) plan offers:



  1. An annual subsidy of up to $600 for routine drug expenses
  2. Coverage for high-end and catastrophic drug costs
  3. Access to competitive discounts on prescription drugs

The plan would provide meaningful help for lower- and middle-income seniors who do not have access to drug coverage while not disrupting the good coverage that two-thirds of seniors already have. It would allow seniors and their doctors to decide what drugs would be best for them, and it would put in place a foundation for changes that could save the Medicare program in the long run.

Beneficiaries would choose from among competing private drug plans rather than a single government plan. The competing plans would manage the entire drug benefit, and would have strong incentives to constrain costs.

All participants in this voluntary program would be eligible for discounts negotiated by their plans and could select plans that offer them the best prices on the drugs they need without the limits on choices that would be likely in government-run plans.

With the PDS plan, Congress could begin to plant the seeds for overall Medicare reform while addressing the political challenge of immediate passage of a prescription drug benefit. From the standpoint of both policy and politics, there isn’t a moment to waste.

Grace-Marie Turner is president of the Galen Institute, a not-for-profit public policy research organization that focuses on free-market ideas for health reform. She can be reached at P.O. Box 19080, Alexandria, VA 22320, or galen@galen.org

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This article was originally published by The New York Sun January 13, 2003.


President Bush is thinking big! In his speech to the Economic Club of Chicago last week, he surprised almost everyone with the size and boldness of his tax cut proposals. And when he delivers his State of the Union address on January 28, all of the signals indicate that the president’s plans for health reform also will be Texas-sized.

The White House continues to send strong signals that the president is determined to put his energies behind modernizing the decrepit Medicare program. House Republican leaders nearly lost control of Congress over “Medi-Scare” in 1996, and the White House and congressional leaders are convinced it requires presidential leadership to make progress on streamlining and improving the program.

There has been a revolution in the ability to treat illnesses through effective pharmaceuticals — true wonder drugs that can extend and improve the lives of millions.

But the Medicare program, established in 1965, has not kept pace with modern medicine’s advances and (with rare exceptions) does not provide coverage for outpatient prescription drugs, even though nearly all private health plans do.

The White House insists it would be irresponsible to tack a prescription drug benefit on to a program that is facing trillions of dollars in unfunded liabilities. Ideally, Medicare beneficiaries would select from among competing private health plans, each offering comprehensive health benefits, including prescription drug coverage.

The president plans to offer more choices of private plans for Medicare beneficiaries with prescription drug benefits available to all and special subsidies for lower-income beneficiaries.

The last two Congresses have tried but failed to enact drug legislation. The House passed legislation in 2000 and again in 2002 that would have provided a structure for competing private plans to offer a drug benefit. The Senate considered four different bills last summer but deadlocked, unable to produce a final bill.

The House can be expected, once again, to pass legislation in this session creating a Medicare drug benefit. But all of the cards remain in the hands of the closely-divided Senate. It will take 60 votes for any bill to pass, and members are jockeying to forge bi-partisan compromises to meet this test.

The Wall Street Journal editorialized this week that “Republicans tend to approach health care policy the way the rest of us do a root canal,” but that is thankfully changing.

The White House is motivated because officials believe the 2004 elections could well swing on health care issues. And the president is emboldened because, for the first time, the leadership on Capitol Hill is passionately committed to health reform.

Senator Bill Frist gave up his post at the National Republican Senatorial Committee to devote his time and energies to health issues, long before he or anyone else had the slightest notion that he would soon become Majority Leader. Dr. Frist has been a leader in introducing and promoting legislation to streamline Medicare through private-sector competition.

House Speaker Dennis Hastert, Ways and Means Chairman Bill Thomas (R-CA), and Commerce Committee Chairman Billy Tauzin (R-LA) are even more experienced on health care and equally determined to make progress on free-market reform. The bill they wrote and passed last year encouraged the creation of private competing drug plans, overseen by Washington, with the government serving as reinsurance agent for large drug expenses.

The right way to institute a drug benefit is to make it part of an overall health plan, like virtually all plans in the private sector. But few members of Congress campaigned on the issue of Medicare modernization, and the first constituency that the president will have to convince to go along will be rank and file members of his own party.

The debate will inevitably become contentious and politicized. Democrats already have introduced legislation this year that would simply add a drug benefit to be run like the rest of Medicare, with prices set by Washington and drugs restricted to those approved by government.

There is, however, another option. The Galen Institute, together with Joe Antos at the American Enterprise Institute, have developed a proposal called the Prescription Drug Security (PDS) plan that is gaining a great deal of attention from political leaders.

The Prescription Drug Security (PDS) plan offers:



  1. An annual subsidy of up to $600 for routine drug expenses
  2. Coverage for high-end and catastrophic drug costs
  3. Access to competitive discounts on prescription drugs

The plan would provide meaningful help for lower- and middle-income seniors who do not have access to drug coverage while not disrupting the good coverage that two-thirds of seniors already have. It would allow seniors and their doctors to decide what drugs would be best for them, and it would put in place a foundation for changes that could save the Medicare program in the long run.

Beneficiaries would choose from among competing private drug plans rather than a single government plan. The competing plans would manage the entire drug benefit, and would have strong incentives to constrain costs.

All participants in this voluntary program would be eligible for discounts negotiated by their plans and could select plans that offer them the best prices on the drugs they need without the limits on choices that would be likely in government-run plans.

With the PDS plan, Congress could begin to plant the seeds for overall Medicare reform while addressing the political challenge of immediate passage of a prescription drug benefit. From the standpoint of both policy and politics, there isn’t a moment to waste.

Grace-Marie Turner is president of the Galen Institute, a not-for-profit public policy research organization that focuses on free-market ideas for health reform. She can be reached at P.O. Box 19080, Alexandria, VA 22320, or galen@galen.org

SHARE THIS ARTICLE

About the author