Editorial
Medicare's new, expensive prescription

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IN the final analysis, U.S. pharmaceutical companies will be better protected than elderly Americans in the overhaul of Medicare passed by Congress.

With the closely held GOP legislation approaching 1,000 pages, it will take time to fully understand all that was included and what the cost will be.

Still, this much is known, as Washington Sen. Patty Murray put it, "The Senate has passed a bill that fundamentally changes the Medicare program while adding a meager 'drug benefit.' "

A bipartisan desire for a prescription drug benefit for the 40 million people on Medicare morphed into a legislative catch-all that tied enough disparate interests together to pass sweeping changes.

An initial impulse is to say that the bloated Medicare bill is better than nothing. That is not clear at all.

The bill costs $400 billion over 10 years, and includes $25 billion in higher payments to rural hospitals and doctors. Other hospitals and doctors facing cuts under current law will receive higher payments or avoid future cuts.

Private employers will receive $70 billion in tax-free subsidies to encourage continued drug coverage for retirees once the Medicare drug plan begins in 2006.

The new drug benefit will be administered by private companies and health plans with $12 billion in subsidies.

In the meantime, Medicare is specifically prohibited from using its buying power to negotiate discounts for bulk drug purchases or create any price structures for reimbursement.

Also, the government cannot have a preferred list of cost-effective drugs or specify a cheaper generic substitute for a costlier name brand. Medicare sets prices with doctors and hospitals but is prevented by law from doing the same thing with prescription medicine.

For two years, 2004 and 2005, Medicare beneficiaries can buy a discount card worth a savings of about 15 percent. Starting in 2006, the Medicare plan will collect a monthly $35 premium and charge a $250 deductible. Then insurance would pay 75 percent of drug costs up to $2,250. Then coverage stops until the retiree pays the next $2,850 out of pocket. Both the premium and gap in coverage are forecast to grow 78 percent in the first seven years of the plan.

Premiums and deductibles would be waived for seniors with incomes up to $12,123, and $6,000 in assets. Other seniors, especially with incomes over $80,000 a year, will find higher premiums.

By 2010, Medicare will compete directly with private plans in six metropolitan areas. If Medicare costs were higher than private plans, Medicare participants would pay more.

The final bill did not directly ban reimporting cheaper drugs from Canada, but requires Department of Health and Human Services approval, which has been refused. Drug companies have a direct stake in being for expanded coverage, and against formularies, price caps and Canadian imports.

Enormous expenses are back-loaded into the new Medicare plan. Nothing about the legislation is straightforward enough to pencil out at the kitchen table.

Each piece could have been handled separately. A clean prescription bill was possible. So was more money for rural hospitals. But taken together, they provided political cover for a fundamental change in the 38-year-old government-run Medicare plan.

Democrats did not get the drug plan they wanted, and many conservative Republicans are simply appalled at the expense: "We are saddling future generations with enormous liabilities," said Sen. Don Nickles, R-Okla.

Narrow approval in the House and reluctant passage in the Senate are tell-tale signs not of triumphant compromise, but deep misgivings about what was accomplished. Only the nation's drug companies are absolutely sure.

Copyright © 2003 The Seattle Times Company