War, Politics Threaten Prescription Drug Plan

By Christine Hall | July 7, 2008 | 8:29 PM EDT

(CNSNews.com) - With another war looming and the next presidential election year approaching, many doubt that America's senior citizens will get their hoped-for Medicare prescription drug benefit this year.

The House and Senate budget committees have started putting together a budget that includes a drug benefit, President Bush's long-term reforms and cost containment measures.

The Bush plan looks for cost savings by allowing seniors to choose among prescription drug plans offered by competing private insurers and drug companies. But the plan has left many Medicare analysts displeased with the quality of services and real cost savings that a re-tooled Medicare might produce.

"If you go the route of just adding a [new] benefit, and you have Medicare setting prices, it's a take-it-or-leave-it" situation, warned John Greene, manager of federal affairs for the National Association of Health Underwriters, a group representing companies that negotiate insurance packages for employers.

Doctors don't want to be told what they can be paid, said Greene, and as it is, they fight over the Medicare reimbursement formula every year.

But "the pie is only so big," said Greene. "If you squeeze it in one place, it bulges in another." It's those groups, like anesthesiologists that can best break down their costs that get higher reimbursements each year, he said. "So there are winners and losers within that budget fight for the pie."

Marilyn Moon, an analyst with the Urban Institute, wants to keep Medicare as a single provider and keep Medicare executives in charge of negotiating drug prices for seniors.

"Medicare is the big kahuna of price controls," said Moon, for which it's "often derided."

"But I would point out to a lot of people that we don't exactly have a well-functioning system out there where doctors come to the marketplace" and negotiate price with insurers, said Moon.

The Cato Institute's Tom Miller, meanwhile, doubts that the president's plan goes far enough in fostering a competitive market for prescription drugs and health care services.

"If the only way you can get private sector involvement is by paying more for it from the taxpayers, that's not reform," said Miller. Instead, he said, Medicare should essentially give beneficiaries a voucher so that, regardless of whether they enroll in traditional Medicare or in a private sector alternative, they can shop for services that best meet their needs.

"Usually if you give people money and tell them to spend the money where they think it will do the most good, they will amazingly enough find something that's more valuable for them at a lower price," said Miller.

Under the president's plan, seniors would have three options for obtaining prescription drug coverage. Seniors could choose to stay in traditional Medicare and get discount drug cards and catastrophic coverage. Or, they could choose to join a new "Enhanced Medicare" to buy drugs from competing private health plans. Seniors could also join a new "Medicare Advantage" plan that would allow them to join health plans with or without drug coverage, similar to the current Medicare+Choice system.

The White House has estimated that the Bush plan would cost taxpayers $400 billion over 10 years. But Health and Human Services Secretary Tommy Thompson has reportedly floated the idea of trimming the proposal by $54 billion to offset already-approved spending on Medicare reimbursements to doctors and hospitals over the next 10 years, if it would help get the plan passed by Congress.

House Budget Committee Chair Jim Nussle (R-Iowa), meanwhile, is looking for a one percent savings on programs like Medicare and Medicaid by eliminating as-yet unspecified waste, fraud and abuse. For Medicare, that would amount to a reported $214 billion over the next decade.

Most analysts agree that, at least when it comes to a prescription drug benefit, Congress will have to pass one this year, since next year will be complicated with presidential politics.

Greene also worries about the impact of a war with Iraq. "If it's a two-week war, which it could be, then maybe we will have an opportunity," said Greene. "If it goes four weeks, then I start to question whether the money will be there."

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