Seniors Are Paying the Price for Medicare Scams

By Mark Weisbrot

September 9, 2004, Knight-Ridder/Tribune Information Services

America's senior citizens, who got hit last week with the largest increase ever in their monthly Medicare premium payments, may want to send a thank you note to Tom Scully, the outspoken former head of Medicare in the Bush Administration. The Medicare prescription drug bill that he guided through Congress last year was laden with tens of billions of dollars of giveaways to the pharmaceutical and insurance industries -- and somebody's got to pay for it. So why not the geriatric set, two-thirds of whom rely on meager Social Security payments for the majority of their income?

This week the federal Government Accountability Office (formerly the General Accounting Office but still GAO) found that Mr. Scully broke the law when he threatened to fire Medicare's Chief Actuary, Richard Foster, if Foster disclosed to Congress his real estimate of the cost of this pork-fest. Foster had estimated that it would cost $500-600 billion over the next decade, but the Bush administration was telling Congress that it would cost no more than $400 billion. The bill might not have passed if the real cost estimates had been known at the time of the vote.

When Congress found out about the deception, it had all the makings of a serious scandal that needed to be investigated. ''What did the president know; when did he know it?," demanded Senator Ted Kennedy when the news broke last year. But this -- like so many other scandals that seem to sprout up like mushrooms in the lush forests of the Bush Administration's corruption -- was soon swept aside as the nation prepared for a war that was to become the mother of all scandals.

Nevertheless this Medicare-gate is worth pursuing. In a letter to the New York Times last November, Mr. Scully wrote that Congress "probably got it about as right as it gets in our complex but wonderful legislative process." Wonderful, indeed! For Mr. Scully, who, unknown to taxpayers, was the object of a bidding war for his services to the private sector at the same time he was navigating the biggest legislative overhaul of Medicare in 40 years through Congress. Lobbyists representing the very same companies that reaped billions from this bill were courting Scully like the losers chasing Cameron Diaz in the Farelly brothers' comedy, "Something About Mary." Except that they were all big winners: not least Abbott Laboratories, Aventis Pharmaceuticals, Caremark Rx and other health care companies, whom Mr. Scully now represents as a registered lobbyist.

The losers were our senior citizens, who will still be paying more (in real, inflation-adjusted dollars) for prescription drugs in 2006 than they were in 2000 -- even after the new Medicare prescription drug benefit is in place.

The drug companies probably got more than $100 billion from this bill. Most importantly for them, it prohibits the government from using its bargaining power as a buyer (through Medicare and Medicaid) to counter the government-enforced monopoly power of the corporations. The insurance companies got tens of billions in subsidies, to enable them to compete with Medicare. It's been well-established for many years that Medicare is more efficient than private insurance companies. In the last few years this has shown up in the private insurers' inability to provide coverage to Medicare beneficiaries at a cost that is competitive with the traditional Medicare program.

Rather than simply acknowledge, as most economists do, that Medicare is more efficient than the private sector, Republicans have persisted in their quest to privatize it as much as possible. Some people attribute this to their "free-market" beliefs, but as this latest Medicare scandal shows, it is mostly driven by the naked greed of powerful special interests. Indeed, it is a perverse sort of "free-market" logic that requires the government to subsidize inefficient corporations, and to promote the most costly form of protectionism in the world -- the pharmaceutical companies' patent monopolies -- as the highest priority of a Medicare overhaul. These corporations now give three-quarters of their campaign contributions to Republicans. They have been getting more than their money's worth.