Drug-benefit fight: echoes of '65

At a rally across from the US Capitol this week, House minority leader Richard Gephardt urged a group of poster-toting seniors to remember history.

After all, today's debate over a prescription drug benefit is no different from the one that shaped Medicare 35 years ago, he said. And with more than a third of the elderly lacking a drug benefit, the stakes are nearly as high as in 1965, when half of seniors had no health insurance.

"We're hearing the same argument we heard from Republicans in 1965," Mr. Gephardt boomed. "They said let's do it in the private sector.... Then they said, let's just give it to the poor."

In one respect, the Missouri congressman makes an important point. Today's lawmakers are face to face with the same issues of more than three decades past: How big a role should government play, and should a new drug benefit cover everyone - or just the most needy?

But while the debate may be the same, the context for these arguments has changed. As a result, Gephardt, his counterpart in the Senate, and President Clinton - who all rallied behind a Democratic prescription-drug plan last week - are by no means guaranteed of winning a benefit that covers all seniors, and which is run under Medicare.

"We have a different context today," says Robert Bixby of the Concord Coalition, a nonpartisan group dedicated to balanced federal budgets.

For one thing, Mr. Bixby says, Medicare was born in the last year of the baby boom, when lawmakers could count on what seemed an endless stream of workers to pay for it. Today the situation is reversed, with too few workers able to support the medical needs of America's bulging elderly population.

Compounding the cost factor are the trends in pharmaceuticals themselves.

Spending on drugs increased by nearly 25 percent annually between 1996 and 1999, according to a new national study by Brandeis University and PCS International, a pharmacy-benefits manager. It is the fastest growing medical expense, with Americans using prescription drugs at younger ages, and substituting newer, more-expensive medications for established products.

Third, the Great Society atmosphere of government largess that helped spawn Medicare no longer prevails. Witness welfare reform, or the increase in government-business partnerships.

"Compared to 1965, there's an even greater skepticism about just letting the government do something," says Robert Helms of the American Enterprise Institute in Washington.

The Democrats are sensitive to this last point. Although a drug benefit would be managed by Medicare under their plan, it would also rely on "prescription-benefit managers" (PBMs) - private contractors who would compete to provide drugs at discount prices to Medicare beneficiaries. Medicare would choose one PBM per region to manage the benefit.

"What's a little different is that the PBMs are private entities and are setting more of the rules, since there's no fee schedule like there is under Medicare," says a Democratic Senate aide.

Universal coverage debate

Democrats and Republicans agree on the need to provide government assistance to the poor and to those who have exceptionally high drug costs. It's the vast swath in the middle where they differ.

Senate minority leader Tom Daschle (D) says that although "it isn't the same kind of landscape" as in 1965, the concept of universal coverage "still holds."

Democrats argue that a benefit, while voluntary, needs to be available to all, to build enough volume for benefit managers to secure discounts on drug prices. For that vast middle, Medicare would contribute at least 50 percent of the premiums and cover as much as half of a beneficiary's drug costs up to $5,000.

Republicans, who have yet to unveil a detailed plan, complain that the benefit manager set-up does not allow enough competition or choice. Further, the concentration of PBMs under Medicare would amount to price controls, limiting resources for research and development in the pharmaceuticals industry.

Instead, the GOP argues, consumers should be able to choose among private insurers, with the government subsidizing their premiums. That way, they are not stuck with whatever plan their regional benefit manager provides, and the tendency toward price fixing is avoided. Additionally, they say the benefit should not be administered by Medicare.

"Theirs is one size fits all. Ours offers several competing plans," says Greg Crist, a GOP spokesman for the House Ways and Means Committee.

While Democrats and Republicans argue over government's role, and who gets covered, there's little talk about how to pay for the benefit - though ever-higher budget surplus estimates relieve some of the pressure.

When the president first introduced the White House plan for a drug benefit last year, he talked about reforms in Medicare that could help offset the cost. But last week, when he and the congressional Democrats presented their plan, there was not a peep about Medicare reform.

Not just another add-on

Some healthcare experts worry that politicians are viewing the drug benefit as just another add-on, when in fact, it's on the scale of Medicare itself. While both Republicans and Democrats put the cost of their programs at roughly $40 billion over five years, analysts hearken back to the egregiously off-base original estimates for Medicare - which is now expected to go broke by 2023.

"The proper way to pay for this benefit is to reform Medicare completely. This [drug benefit] is like putting a spoiler on a 1977 Pinto. You need an entirely new car," says Jim Frogue at the Heritage Foundation.

But Medicare reform is too hot a topic to be seriously considered in an election year, and will almost certainly be put off for the next administration and Congress to tackle. By the looks of it, the same delay may await the drug benefit, as well.

(c) Copyright 2000. The Christian Science Publishing Society