Bidding Wars


The bidding wars over a Medicare prescription drug benefit accelerated this week, with both House and Senate Democrats offering plans that seem initially generous to seniors but which would quickly lead to heavy-handed, destructive, and ultimately unworkable price setting – and huge new costs to taxpayers.

The House Democratic version offered yesterday would require seniors to pay a $100 deductible, $25 monthly premiums, then 20% of their drug costs up to $2,000 when full catastrophic coverage would kick in. The Senate version, offered by Sens. Ted Kennedy and Bob Graham, offers fixed prices for prescriptions of $10 for generics, $40 for brand names, and $60 for “non-preferred” drugs. After $4,000, the government would pay all drug costs.

The federal government would instantly get involved in setting prices and restricting access to the newest drugs, policies that have seriously damaged pharmaceutical research and innovation in Europe. For seniors worried about government controlling what’s in their medicine chest, those two words – “non-preferred” – mean that government will indeed decide which drugs are going to be available and which aren’t.

House Republicans are trying to be responsible in shaping a benefit and incorporating Medicare reforms into their bill, but clearly they are at a disadvantage in this escalating and reckless bidding war.

On the bright side, we’re anxiously waiting this month for a ruling from the Internal Revenue Service on the new Personal Spending Account plans that many companies are exploring as a new health benefit option for their employees. Dr. John Rowe, chairman, president and CEO of Aetna US Healthcare, said a number of major companies are ready to sign up if they get the green light from the IRS.

All signs indicate that the IRS is expected to look favorably on this new health benefit option that would allow employers to put part of the money they are spending on premiums into a spending account that employees could use for routine medical bills without anyone micromanaging their choices. The company also would purchase catastrophic coverage to protect employees against the costs of large medical bills.

The IRS ruling would determine whether any unspent funds in the employee’s personal spending account could be carried over from one year to the next – an essential element to promote wiser and more economical use of health services.

Dr. Rowe said he is encouraging companies to be at least as generous with the new plans (his is called the Aetna HealthFund) as they are with traditional insurance. Companies that have a version of this benefit option in place are finding strong employee reception and cost savings to boot. Could this be the next revolution in health benefits?

Fortune magazine reported recently on Humana’s experience in offering its own employees a Personal Spending Account option. “Preliminary results show that employees on average tend to accept more risk in exchange for lower monthly payments. That is helping curb Humana’s internal health-insurance expense; expected to go up 19% this year, it may rise as little as 3.7%.”

Here’s a PowerPoint presentation I used in a speech this week before the National Federation of Independent Business to describe how we get to this new world of consumer-driven health care:

And finally, a small indulgence: This turns out to be new puppy month at the Galen Institute, and, as I have learned, buying a pure-bred puppy these days is a BIG DEAL! After months of decision-making about breeds and searching the country for the perfect breeders, Galen’s director of programs, Liz Lamirand, and her husband, John, settled on a German Shorthaired Pointer. They drove through a rainstorm to Dulles Airport last Thursday to pick up their adorable puppy, Scout, from Minnesota.

And this coming Monday after several months of waiting, Tara Persico, our technology and research guru, will meet her TWO new Pug puppies, named Peabody and Oliver, when they arrive here from Texas. You can see for yourself how cute they are at

Grace-Marie Turner

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