For a change of pace, Health Policy Matters this week features a “pro-con” exchange on the new Medicare drug benefit between Rep. Jim McDermott (D-WA) and me.
The paired articles were published over the last several days in newspapers around the country, including The Sacramento Bee, The Kansas City Star, The Charlotte Observer, and Sunday Gazette-Mail.
The contrast in our views could not be more vivid: “So long as we permit the private sector to govern the public sector, as was the case in Medicare Part D, the American people will be short changed,” Rep. McDermott writes. “It is time for America to have universal health care that will put the interests of the American people ahead of the special interests.”
I argue that private competition is indeed working: “The drug plans compete fiercely to get seniors to sign up with them, offering a long list of the newest drugs and negotiating with the drug companies to get the lowest prices?Costs for the new Medicare drug benefit are lower than original estimates, something that almost never happens with a government program, because seniors were given the chance to be smart shoppers.”
I regularly have commentaries published in newspapers around the country, but this pro-con seems to mark more clearly the contrast in philosophies about the future of our health care system.
We will be back after the election to assess what the results portend for the next chapter of the health policy debate.
Your vote matters.
The Kansas City Star
October 29, 2006
Competition is working to bring down health costs and give people options about their care.
ALEXANDRIA, Va. Competition works in health care, and consumers are starting to exercise their buying power to get more choices and bring prices down.
For example, costs for the new Medicare drug benefit are lower than original estimates, something that almost never happens with a government program, because seniors were given the chance to be smart shoppers.
The new Medicare drug program allows private companies, not a centralized government bureaucracy, to deliver the new drug benefit.
The drug plans compete fiercely to get seniors to sign up with them, offering a long list of the newest drugs and negotiating with the drug companies to get the lowest prices.
The result: Seniors have driven the average monthly premium for the drug benefit down by 40 percent. The drug benefit was expected to cost $37 a month when Congress created the plan, but because seniors flocked to the lower cost plans, the average premium is only $24 a month. And seniors will see average prices stay level next year.
So premium prices for the new Medicare drug benefit are lower and, once seniors had finished the sign-up process, the majority of enrollees said they were happy with their coverage and were saving money — an average of $1,200 a year.
And consumer power is working to bring prices down at the retail level as well. One giant retail chain announced last month that it would offer customers a 30-day supply of more than 100 different generic medicines for just $4 each. A competitor quickly said it would match the prices, and surely others will be close behind. None of the other pharmacies wants to lose the business of customers who just might pick up some soap and toothpaste when they pick up their prescriptions.
Consumers are beginning to reshape the health sector so that it can operate more like the rest of the economy, forcing companies to come up with faster, better, cheaper services and products, something government is notoriously unable to do.
Yet some congressional leaders want to change the Medicare drug benefit by allowing Medicare to negotiate lower prices. They argue that government could use its huge buying power to get a better deal for seniors.
But because the government is such a big buyer, that means it wouldn’t “negotiate” prices but would dictate them. It could force companies to cut their prices so much that they would have fewer resources left to invest in research to produce the next generation of drugs. We could wait a long time for that cure for Alzheimer’s or Parkinson’s if research dries up.
That’s exactly what has happened in Europe. Those governments have been so intent on getting cheap pills that they have driven pharmaceutical companies to move their research facilities — and the good, high-paying jobs that go with them — to the more friendly environment in the United States.
There’s no doubt that Plan D is clumsily structured with a so-called doughnut hole in the middle that may force some seniors to pay about $3,000 out of pocket after their routine coverage ends and before catastrophic coverage kicks in.
But that’s not the fault of the private market: That is what an insurance policy designed by Congress looks like. In fact, the drug companies are working hard to fill the doughnut hole by developing plans that offer coverage in the gap.
And seniors also have a chance, starting Nov. 15, to switch plans if they find themselves hitting the doughnut hole this year.
Consumers are smart shoppers, and they have shown they can exercise even stronger buying power than the federal government and do so without killing innovation and research. It’s about time that we give a new force in our health-care system — savvy consumers — a chance for a change.
(c)2006 Galen Institute
Grace-Marie Turner is president of the Galen Institute, which is funded in part by the pharmaceutical industry. To reach her, send e-mail to firstname.lastname@example.org.
Health-care plan for seniors benefits only special interest groups and is confusing and costly.
Rep. Jim McDermott
Health-care plan for seniors benefits only special interest groups and is confusing and costly.
WASHINGTON Millions of senior citizens today are falling into a hole created by legislation Republicans claimed would benefit seniors when it was actually written by drug companies who unabashedly favored themselves first and foremost.
Medicare Part D was a historic opportunity to provide real relief for seniors to help cover the cost of prescription drugs. But Republicans were more interested in special interests than the common good, and so they forced through Congress a deeply flawed bill that overwhelmingly fails the American people.
The legislation includes a so-called doughnut hole — a gap in coverage in which seniors continue to pay premiums but receive no benefit. Once they use $2,250 in benefits, seniors are left on their own, and coverage does not resume until they have spent $3,600 of their own money. Seniors are forced to pay the full cost of prescription drugs, and at the same time they still have to pay a premium to their insurance company every month.
The legislation neutralizes the enormous purchasing power of 40 million seniors that would otherwise yield dramatic savings in the cost of drugs.
The legislation channels implementation through hundreds of private insurance companies that contract with Medicare. This fragments purchasing power into hundreds of pieces, and the legislation reinforces this artificial price support by explicitly prohibiting the secretary of health and human services from negotiating on behalf of seniors for lower drug prices. Prices for drugs most often used by seniors have gone up substantially since this program was created.
Medicare Part D forces seniors to choose among complex and confusing plans by a certain date or be penalized 1 percent a month for every month they postpone a decision. And the penalty would apply forever.
Our nation’s seniors deserve and need help covering the cost of their prescription drugs, which will total nearly $2 trillion over the next 10 years. The ability of pharmaceutical advances to fight disease and prolong life is extraordinary — and amazing advances are just ahead. To deny seniors access to these benefits is simply unacceptable. And to take advantage of seniors as Republicans have done through this special-interest legislation is equally unacceptable.
When it comes to health care, Congress must have only one special interest — the American people. So long as we permit the private sector to govern the public sector, as was the case in Medicare Part D, the American people will be short changed.
That is exactly what is happening today with America’s health-care crisis, yet the private sector bemoans every effort to include every American in a health-care program, even as the crisis worsens.
In the richest nation on earth, affordable health care should be a right, not a privilege. Forty-seven million Americans have no health insurance and millions more — including many in Medicare — increasingly are finding that even their share of health costs are unaffordable.
If nothing else, the failure of Medicare Part D should be a wake-up call for the need to treat the health-care crisis as any physician (and I am one) would treat a gravely ill patient. All the Band-Aids the special interests have applied have done nothing to heal the wound, much less cure the problem.
America spends more money on health care than dozens of other major nations, and yet Americans receive less. A rash of recent stories report that U.S. companies now are offering employees all-expense paid trips to other countries for medical treatment because it is cheaper — even after factoring in international travel and related expenses.
The conclusion is inescapable: Health care is on life support, and it is time to administer effective treatment. It is time for America to have universal health care that will put the interests of the American people ahead of the special interests.
(c)2006 Rep. Jim McDermott
Rep. Jim McDermott, a Washington Democrat, is a member of the House Ways and Committee.
Health Policy Matters is a weekly newsletter containing summaries of timely and informative studies and articles on free-market health reform. It features research and writings by participants in the Health Policy Consensus Group, articles of interest from the health policy world, and announcements of coming events. Health Policy Matters is published by the Galen Institute, a not-for-profit public policy organization specializing in information and education on health policy. For more information about the newsletter and our organization, please visit our website at www.galen.org.
If you wish to subscribe to this free weekly newsletter, update your address, or be removed from our list, please send an e-mail message to email@example.com.
The views expressed in this newsletter are the opinions of the authors and do not necessarily reflect the views of the Galen Institute or its directors.