Different Opinions On Medicare

Dear Friends and Colleagues:
Attached you find two articles highlighting two different opinions regarding the function, role and success of the Medicare program.
The first article by Paul Krugman is entitled "The Plot Against Medicare. In it he author correctly states that:

"The 2003 Medicare legislation created Part D, the drug benefit for seniors — but unlike the rest of Medicare, Part D isn’t provided directly by the government. Instead, you can get it only through a private drug plan, provided by an insurance company. At the same time, the bill sharply increased payments to Medicare Advantage plans, which also funnel Medicare funds through insurance companies. As a result, Medicare — originally a system in which the government paid people’s medical bills — is becoming, instead, a system in which the government pays the insurance industry to provide coverage. And a lot of the money never makes it to the people Medicare is supposed to help.....Meanwhile, those Medicare Advantage plans cost taxpayers 12 percent more per recipient than standard Medicare. In the next five years that subsidy will cost more than $50 billion — about what it would cost to provide all children in America with health insurance. Some of that $50 billion will be passed on to seniors in extra benefits, but a lot of it will go to overhead, marketing expenses and profits."

He concludes stating that

" Public opinion is strongly in favor of universal health care, and for good reason: fear of losing health insurance has become a constant anxiety of the middle class. Yet even as we talk about guaranteeing insurance to all, privatization is undermining Medicare — and people who should know better are aiding and abetting the process."

In the second article from the Wall Street Journal "The Competence Man" the author touts the leadership of the Dr. McClellan, the former CMS head, who was implementing the Medicare Part D program.

"His success, in particular with the drug benefit, rests in two broad ideas. The first was to design a program that immediately attracted a critical mass of private players to provide price and choice competition.
Dr. McClellan's other strategy -- and the flip side of the coin -- was to get seniors enrolled quickly. His team designed an Internet program that allowed seniors to punch in their information and examine the best plans. His agency reached out to local organizations -- church groups, community centers -- and enlisted their aid in explaining details."
According to the author private companies have flocked to offer a drug benefit, giving most seniors a choice of 50 innovative plans. The competitive jockeying has slashed prices from an expected $37-a-month premium to an average $22. The cost of Medicare Part D for taxpayers was 30% below expectations its first year -- unheard of in government. And Medicare Advantage, which allows seniors to choose between private insurers, has grown to encompass nearly one in five beneficiaries.

Even though I respect Dr.McClellan's efforts I consider Medicare Part D as the biggest mistake of the Bush administration.
Medicare is an example of a single-payer system serving the senior segment of our population. Its its not a "decrepit program" and outsourcing its services to private companies provides drug companies with mega-profits on the expense of US tax payers.
Who is going to pay the estimated $ 8 Trillion price tag for the Medicare Part D program? Our children and grand children!
By then Bush and Co. won't be around, our government will have to use its entire federal budget for the payment of a gigantic debt load created by inflated entitlement programs and we may have to ask ourselves: what did we do to stop it?


Yours


Bernd


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New York Times, April 20, 2007 Op-Ed Columnist
The Plot Against Medicare
By PAUL KRUGMAN

The plot against Social Security failed: President Bush’s attempt to privatize the system crashed and burned when the public realized what he was up to. But the plot against Medicare is faring better: the stealth privatization embedded in the Medicare Modernization Act, which Congress literally passed in the dead of night back in 2003, is proceeding apace.

Worse yet, the forces behind privatization not only continue to have the G.O.P. in their pocket, but they have also been finding useful idiots within the newly powerful Democratic coalition. And it’s not just politicians with an eye on campaign contributions. There’s no nice way to say it: the N.A.A.C.P. and the League of United Latin American Citizens have become patsies for the insurance industry.

To appreciate what’s going on, you need to know what has been happening to Medicare in the last few years.

The 2003 Medicare legislation created Part D, the drug benefit for seniors — but unlike the rest of Medicare, Part D isn’t provided directly by the government. Instead, you can get it only through a private drug plan, provided by an insurance company. At the same time, the bill sharply increased payments to Medicare Advantage plans, which also funnel Medicare funds through insurance companies.

As a result, Medicare — originally a system in which the government paid people’s medical bills — is becoming, instead, a system in which the government pays the insurance industry to provide coverage. And a lot of the money never makes it to the people Medicare is supposed to help.

In the case of the drug benefit, the private drug plans add an extra, costly layer of bureaucracy. Worse yet, they have much less ability to bargain for lower drug prices than government programs like Medicaid and the Veterans Health Administration. Reasonable estimates suggest that if Congress had eliminated the middlemen, it could have created a much better drug plan — one without the notorious “doughnut hole,” the gap in coverage once your annual expenses exceed $2,400 per year — at no higher cost.

Meanwhile, those Medicare Advantage plans cost taxpayers 12 percent more per recipient than standard Medicare. In the next five years that subsidy will cost more than $50 billion — about what it would cost to provide all children in America with health insurance. Some of that $50 billion will be passed on to seniors in extra benefits, but a lot of it will go to overhead, marketing expenses and profits.

With the Democratic victory last fall, you might have expected these things to change. But the political news over the last few days has been grim.

First, the Senate failed to end debate on a bill — in effect, killing it — that would have allowed Medicare to negotiate over drug prices. The bill was too weak to have allowed Medicare to get large discounts. Still, it would at least have established the principle of using government bargaining power to get a better deal. But in spite of overwhelming public support for price negotiation, 42 senators, all Republicans, voted no on allowing the bill to go forward.

If we can’t even establish the principle of negotiation, a true repair of the damage done in 2003 — which would require having Medicare offer seniors the option of getting their drug coverage directly, without involving the insurance companies — seems politically far out of reach.

At the same time, attempts to rein in those Medicare Advantage payments seem to be running aground. Everyone knew that reducing payments would be politically tough. What comes as a bitter surprise is the fact that minority advocacy groups are now part of the problem, with both the N.A.A.C.P. and the League of United Latin American Citizens sending letters to Congressional leaders opposing plans to scale back the subsidy.

What seems to have happened is that both groups have been taken in by insurance industry disinformation, which falsely claims that minorities benefit disproportionately from this subsidy. It’s a claim that has been thoroughly debunked in a study by the Center on Budget and Policy Priorities — but apparently the truth isn’t getting through.

Public opinion is strongly in favor of universal health care, and for good reason: fear of losing health insurance has become a constant anxiety of the middle class. Yet even as we talk about guaranteeing insurance to all, privatization is undermining Medicare — and people who should know better are aiding and abetting the process.


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Competence Man, April 20th, 2007 Wall Street Journal

Republicans won a big victory this week, shooting down a Democratic plan for more government-run health care. The GOP victors, and free-marketeers, might send their thank-you notes to Dr. Mark McClellan.

Dr. McClellan is the 43-year-old internist who, until recently, held the thankless job of running Medicare. He was handed the further thankless task of designing and implementing Congress's tepid 2003 Medicare reform. And he's the big brain who then wrung every last ounce out of that authority to create a striking new model for Medicare competition that is today not only performing beyond expectations, but is changing the political health-care debate.

High praise, yes, but borne out by this week's GOP defeat of a bill to allow the government to fix Medicare drug prices. That was a top Democratic promise this last election, as the party sought to play off public anger over health-care costs. Liberals saw it as an important step toward their all-government, health-care nirvana. Nancy Pelosi and Harry Reid also felt this was an issue on which they could once again roll Republicans, by flashing the impoverished-senior-citizens card.

Instead, Dr. McClellan's new model came online and wowed the older class. Private companies have flocked to offer a drug benefit, giving most seniors a choice of 50 innovative plans. The competitive jockeying has slashed prices from an expected $37-a-month premium to an average $22. The cost of Medicare Part D for taxpayers was 30% below expectations its first year -- unheard of in government. And Medicare Advantage, which allows seniors to choose between private insurers, has grown to encompass nearly one in five beneficiaries.

This success has rebutted Democratic criticisms of the drug benefit and shown up those who tar the Bush administration as incompetent. The program's success emboldened Republicans to vote for free-market health care this week. Democrats have seen flagging public support for their program of more government and fewer drugs. While Mr. Reid held his caucus together this week, some are worried about bashing a drug benefit that has an 80% senior approval rating. "Congress only wishes it had an 80% approval rating," chuckles former Democratic Sen. John Breaux, an author of the 2003 reform. "A lot of folks campaigned last year on 'We're going to fix this program,' only to be told by seniors, 'Wait a minute, it ain't broke.'"

None of this was inevitable, but goes back to the competent Dr. McClellan. President Bush came to town pushing Medicare reform, and had a shot at an historic overhaul. The GOP could offer the carrot of a new drug benefit, in return for opening the entire decrepit program to private competition. Instead, Bush and Co. became more interested in claiming credit for an $8 trillion entitlement, and settled for meager reform.

Dr. McClellan nonetheless took this pared-down opportunity and used it to show private competition can work. His success, in particular with the drug benefit, rests in two broad ideas. The first was to design a program that immediately attracted a critical mass of private players to provide price and choice competition. At the time, nobody thought that possible. Mr. Breaux remembers Congress worrying that so few private players would participate that whole areas of the country would lack private drug plans.

Dr. McClellan's solution was a program that gave companies maximum freedom to design plans, bundle drugs and turn a profit. He was a salesman, talking up the opportunities and even traveling to New York to reassure Wall Street. It worked, and by the first days of business most seniors were being courted by anywhere from 11 to 23 plan sponsors. Those numbers have only grown, creating so much competition that sponsors are eliminating deductibles, lowering premiums, offering more drugs. It's also led to smart cost-cutting and efficiencies; an estimated 60% of Medicare prescriptions are now for generics.

Dr. McClellan's other strategy -- and the flip side of the coin -- was to get seniors enrolled quickly. His team designed an Internet program that allowed seniors to punch in their information and examine the best plans. His agency reached out to local organizations -- church groups, community centers -- and enlisted their aid in explaining details. A call center at one point handled 400,000 plan questions a day. Today, some 90% of Medicare recipients are enrolled in the benefit, numbers that have further attracted private players, further spurred competition, further lowered prices. "This is how you come in under budget, increase satisfaction," says the man himself, Dr. McClellan. He adds, humbly, "Nobody should think this is perfect yet, but it's clearly accomplishing some good things."

Good things or no, the reforms are still at risk. There was a time when Democrats believed in Medicare reform, but now most prefer it as a political stick to beat President Bush. There are also liberals -- Henry Waxman, Pete Stark -- who understand this is a crucial moment in the national debate over government-versus-private health care, and will do what they can to sabotage the reforms.

Expect, therefore, more votes over Medicare's right to price-fix. If a broad bill can't pass, liberal politicians will instead target individual, high-cost drugs, arguing that since Medicare foots most of the bill for these products, it should have the right to "negotiate." The real goal will be to get any foot in the price-setting door, making it harder for private companies to craft flexible drug packages, and laying the groundwork for more price-setting down the road.

Expect, too, a push to starve the competitive programs of cash. Critics know how effective this is, having siphoned dollars out of the old Medicare Advantage program in the 1990s, causing private plans to drop out, and giving the program a bad name. Dr. McClellan's reforms, and a Republican Congress, have re-energized the program, but the key to future success is in the budget. Republicans would do well to spend more time touting the competition successes of the reform, rather than the drug giveaway.

In a perfect world, the Bush administration would never have swallowed that entitlement in the first place. In our imperfect world, it at least had the wisdom to hand the reform challenge to a guy who was able to demonstrate the merits of health-care competition, and optimistically, pave the way for broader reform down the road.

Write to kim@wsj.com1.