Medicare has been treated as a whipping boy in the discussions around reforming our current healthcare financing system. I maintain that most of the criticisms are flawed, and don’t stand up to critical scrutiny. Medicare is a fundamentally sound program, which has been compromised both by unaddressed demographic changes, and by intentionally unfunded program expansions.
Among the unavoidable challenges Medicare faces, most have nothing to do with program efficiency, and everything to do with the demographics of the beneficiaries:
High-cost population. Older people are simply more expensive to cover. Medicare disproportionally covers these populations. These people were not covered before, which is why Medicare was developed, and why it’s so popular.
Increased expectation of heroic life-extension measures. Dying people seeking to extend their lives are very expensive.
Fewer workers support more beneficiaries. Longevity increases, shifts in the demographic age profile of our population, further magnify the first two imbalances.
Despite this, by most key metrics, Medicare operates far more efficiently than do private insurance companies. Critics state that because of the client base, its 75% administrative cost advantage may be somewhat overstated. But even if we adjust for these concerns, Medicare is still much more efficient.
Among the other obstacles, some have the specific intention of driving Medicare to bankruptcy – and discrediting the idea of any public approach to insurance:
A steadfast refusal to adapt the funding model to address the looming demographic imbalances listed above. A system designed in the 1960s, with contemporary life-span and treatment expectations, needs updating to reflect current and future realities.
Medicare Part D. (See Below)
Wednesday, October 7, 2009
What’s Wrong with Medicare Part D (prescription drug coverage)
From its inception, Medicare supporters have tried to add prescription drug benefits to the plan. This was always blocked by the pharmaceutical lobby, because it posed a threat to their profits.
But when the Republican Party gained control of both houses of Congress and the administration in 2002, the pharmaceutical industry was able to customize an plan that would create a cash cow. They literally wrote the Medicare Part D law that was then passed with virtually no amendments. It contains a key provision which prohibits Medicare from negotiating prescription drugs prices. This means that the pharmaceutical industry was to be given a huge captive base of high usage customers, who pay retail. This would have been a budget-buster – except that there was no budget to pay for Medicare Part D in the first place. This exorbitant expense was piled on top of an already fiscally challenged program.
The plan has another bizarre provision, commonly known as the ‘donut hole’. Above a certain annual spending threshold, the program stops paying for drugs until a second threshold is reached. This was presented as a way of controlling costs – but in reality it was a way of placating the insurance industry, which immediately moved in with a whole new portfolio of products to ‘fill the gap’ which had been created for them.
Medicare Part D was a perfect finesse for the national Republican Party:
It was designed to be difficult to vote against—despite the poison pill—because it provides a needed benefit to seniors.
It tremendously increased the profits of the pharmaceutical industry, who wrote the law. These increased profits now bankroll resistance to any meaningful modifications.
Created an entirely new, highly profitable category of insurance (‘donut hole’ coverage).
Greatly accelerates the insolvency of the overall Medicare program, setting it up as an example of government inefficiency, and justifying continued resistance to any public insurance plan.
Despite the finesse, House Democrats were nearly unanimous in opposition to this fiscally irresponsible program. And despite incredible pressure from their leadership, many conscientious House Republicans opposed it as well. Despite a large Republican majority in the House, passage was only achieved after an unprecedented three-hour roll-call vote in the middle of the night (roll-call votes normally last 15 minutes), during which some members of the Republican caucus were blackmailed to change their votes. Rep. Walter Jones (R-N.C.) refers to this as the ‘ugliest night’ he has ever seen in politics. Check out this interview with him and fellow House Republican Dan Burton (R-Indiana):
http://www.cbsnews.com/stories/2007/03/29/60minutes/main2625305.shtml
Two months after passage of Medicare Part D, the man who steered it through the House, Rep Billy Tauzin (R-LA), left government to become the President and CEO of the pharmaceutical lobbying group PhRMA. This was a job change for Tauzin in name only. His seven-figure salary was a small thanks for the billions in profit they will reap from his efforts.
The blatant corruption of this act, and the perpetrators, presupposes that the American people—distracted as we were by the War on Terror®—were not paying attention, or would soon forget. They were wrong. We were watching every corrupt step, and we will not forget.
But when the Republican Party gained control of both houses of Congress and the administration in 2002, the pharmaceutical industry was able to customize an plan that would create a cash cow. They literally wrote the Medicare Part D law that was then passed with virtually no amendments. It contains a key provision which prohibits Medicare from negotiating prescription drugs prices. This means that the pharmaceutical industry was to be given a huge captive base of high usage customers, who pay retail. This would have been a budget-buster – except that there was no budget to pay for Medicare Part D in the first place. This exorbitant expense was piled on top of an already fiscally challenged program.
The plan has another bizarre provision, commonly known as the ‘donut hole’. Above a certain annual spending threshold, the program stops paying for drugs until a second threshold is reached. This was presented as a way of controlling costs – but in reality it was a way of placating the insurance industry, which immediately moved in with a whole new portfolio of products to ‘fill the gap’ which had been created for them.
Medicare Part D was a perfect finesse for the national Republican Party:
It was designed to be difficult to vote against—despite the poison pill—because it provides a needed benefit to seniors.
It tremendously increased the profits of the pharmaceutical industry, who wrote the law. These increased profits now bankroll resistance to any meaningful modifications.
Created an entirely new, highly profitable category of insurance (‘donut hole’ coverage).
Greatly accelerates the insolvency of the overall Medicare program, setting it up as an example of government inefficiency, and justifying continued resistance to any public insurance plan.
Despite the finesse, House Democrats were nearly unanimous in opposition to this fiscally irresponsible program. And despite incredible pressure from their leadership, many conscientious House Republicans opposed it as well. Despite a large Republican majority in the House, passage was only achieved after an unprecedented three-hour roll-call vote in the middle of the night (roll-call votes normally last 15 minutes), during which some members of the Republican caucus were blackmailed to change their votes. Rep. Walter Jones (R-N.C.) refers to this as the ‘ugliest night’ he has ever seen in politics. Check out this interview with him and fellow House Republican Dan Burton (R-Indiana):
http://www.cbsnews.com/stories/2007/03/29/60minutes/main2625305.shtml
Two months after passage of Medicare Part D, the man who steered it through the House, Rep Billy Tauzin (R-LA), left government to become the President and CEO of the pharmaceutical lobbying group PhRMA. This was a job change for Tauzin in name only. His seven-figure salary was a small thanks for the billions in profit they will reap from his efforts.
The blatant corruption of this act, and the perpetrators, presupposes that the American people—distracted as we were by the War on Terror®—were not paying attention, or would soon forget. They were wrong. We were watching every corrupt step, and we will not forget.
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