Battle for Medicare Prescription Drug Benefits Heats Up

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Mark Weisbrot
Fort Lauderdale Sun Sentinel, July 14, 2000
Knight-Ridder/Tribune Media Services, June 30, 2000

Hey, kids! Want a free ten minute long distance calling card? Check out www.callyourgrandma.com. Just don't forget to ask your grandma to oppose any attempts by those nasty politicians to add a prescription drug benefit to Medicare.

This was just one bit of largesse, along with $2 million of TV ads in just the last three weeks, from a drug industry front group calling itself Citizens for Better Medicare. The organization was exposed in a recent report by the consumer group Public Citizen. As Congresswoman Rosa DeLauro put it, "they're not citizens, and they're not for better Medicare."

But the battle is heating up, with charges and counter-charges flying across the airwaves, in what could become a pivotal issue in the November elections.

Some background on the problem: Medicare, the federal program that provides health insurance for senior citizens and the disabled, does not cover prescription drugs outside the hospital setting. This leaves about 14 million people, or 35% of beneficiaries, without any drug coverage. With spending on pharmaceuticals rising at a rate of 17 percent a year, and seniors considered to be a vital swing vote, pressure has built to provide them with some relief.

President Clinton has proposed some modest partial coverage-- on bills up to $2000 per year (gradually increasing to $5000 as monthly premiums increase from $25 to $50), with the beneficiary paying half. It would also provide complete coverage for people who have already spent $4000 of their own money in one year.

In deference to the pharmaceutical lobby, President Clinton has not proposed to use the buying power of the Medicare program to reduce the price paid for seniors' prescription drugs. This is the most serious flaw in the bill, and one that would make its costs difficult to sustain over the long run.

But even this concession to the drug companies was not enough. They fear that once a drug benefit is established as part of Medicare, pressure will build to keep prices under control.

For their part, Republicans have rammed a stingier version of the Clinton proposal through the House, with one major difference: rather than establishing a standard benefit through Medicare, it would subsidize private insurance companies and HMOs to provide coverage. But this creates a mess: there is no guarantee that private companies would provide the necessary insurance. More likely, they would be in a position to demand large subsidies from the government, and then make money the best way they know how: insure the healthy and avoid the sick.

This ongoing battle illustrates some important political and economic lessons. First, the influence of corporate money in our political system is a major obstacle to reform. Cynics may say that's true everywhere, but we have an especially acute case of the disease here. That's why we are the only developed country that does not provide health insurance to our citizens (44 million of whom are currently doing without). Although the Constitution provides only the President with veto power over legislation, our drug and insurance companies have established the equivalent for themselves in the area of health care.

The economic lesson is also clear: the monopoly power of the pharmaceutical companies, created and enforced by the government through our system of patents, is becoming ever more wasteful, inefficient, and socially destructive. We pay twice as much as Canadians or Europeans do for the same prescription drugs, because our government treats this monopoly power as inviolable. And then the companies use their windfall profits to fight health care reform-- even so small a step as adding a prescription drug benefit to Medicare.

There are solutions to these problems. Most immediately, the government can use its buying power through Medicare (as it already does through the Department of Defense and Veterans Affairs), or regulation, to lower the cost of prescription drugs to seniors by as much as 40 or 50 percent. In fact there is currently a bill in Congress (the Prescription Drug Fairness for Seniors Act), which would accomplish this. It has gathered 164 co-sponsors so far.

Over the longer run, we will need alternatives to the current patent system as a means of funding research and development. Of course, we already have them: most cancer drugs, for example, are discovered on government grants. In many cases, all that would be needed is to keep the patents in the public domain.

The drug companies may think they have the upper hand, but $30 million of TV ads over the last year do not seem to have moved the public any closer to their side. This issue is not going away.


Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. He is also president of Just Foreign Policy