Rx for Reform
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SUSAN DENTZER: 67-year-old Bessie Johnson has a raft of serious medical conditions ranging from heart disease to high blood pressure. Frequently in and out of the hospital, she has seen her health improve with the aid of prescription drugs. But that improvement has come at a steep price. Johnson pays about $450 a month for her medications– that’s a heavy load considering that she and her husband, Irvin, have an income of just over $13,000 a year.
BESSIE JOHNSON: If I don’t have enough money to pay it, I just… Try to get the main ones that I really need. Most of the time I have been lucky so far to get half of it, when I can’t get the whole.
SUSAN DENTZER: The Johnsons are beneficiaries of Medicare, the federal health insurance plan for 40 million elderly and disabled Americans. They’re only too aware of what may be the program’s biggest shortcoming. Although Medicare covers the lion’s share of hospital bills and doctors’ care, it offers almost no coverage for prescription drugs for patients not in the hospital. That’s a huge drawback when prescription drugs are becoming an ever-more important way of preventing and treating disease. So last year, and again in last month’s State of the Union address, President Clinton proposed allowing all Medicare beneficiaries to enroll in a new part of the program that would help pay for drug coverage.
PRESIDENT CLINTON: More than three in five of our seniors now lack dependable drug coverage, which can lengthen and enrich their lives. In good conscience, we cannot let another year pass without extending to all our seniors this lifeline of affordable prescription drugs. (Applause)
SUSAN DENTZER: Under the President’s plan, beginning in 2003, beneficiaries would pay $26 a month in premiums. Low-income seniors would pay nothing or nominal amounts. In return, Medicare would pay half of beneficiaries’ annual drug costs up to $2,000; in other words, as much as $1,000 a year. Those amounts would gradually increase, and eventually Medicare would pay as much as $2,500 toward $5,000 in beneficiaries’ annual drug costs. When the President first unveiled this proposal last year, it ran into a wall of opposition. Many lawmakers feared that Medicare’s long-term financial woes might only be worsened by adding drug benefits without making other changes in the program. That concern has grown with the projected costs of the President’s proposal, now estimated at $160 billion over 10 years. And it was a dominant theme of Congressional hearings over the past two weeks. Democratic Senator John Breaux of Louisiana is the ranking Democrat on the Senate’s Special Committee on Aging.
SEN. JOHN BREAUX, (D) Louisiana: We have a program that we’re adding prescription drugs to that this year has a $7 billion deficit– $7 billion– and it is projected to become insolvent in the year 2014. Adding prescription drugs to Medicare without reforming Medicare is like adding lead weights to a sinking ship. It’s not going to help the ship float any better.
SUSAN DENTZER: Even more formidable opposition came from the pharmaceutical industry, which fears that a new Medicare drug benefit would trigger government regulation of drug prices. Ultimately, they argued, that would mean fewer life-saving drugs for consumers. The industry mounted a costly ad campaign last year to drive home the point, featuring a fictional Medicare beneficiary named Flo.
FLO: I don’t want big government in my medicine cabinet.
SUSAN DENTZER: Recently the industry has made at least a partial turnabout. Pharmaceutical company executives said they had decided to work with the president and Congress on a bipartisan coverage plan. A new round of commercials emerged.
FLO: Seniors are joining hands to support new plans in Congress based on the work of the National Bipartisan Medicare Commission — Plans that help seniors who have private drug coverage to keep it, and seniors who need it to get it. Knowing we are all covered– that’s peace of mind.
SUSAN DENTZER: Lawmakers in both parties now predict that Congress will work to pass some sort of drug benefit this year. But dozens of thorny issues remain; not the least of which is how to pay for drug benefits.
ELIZABETH FARNSWORTH: For more, we turn to Marilyn Moon, a senior fellow at the Urban institute in Washington, and former director of public policy for the American Association of Retired Persons. She’s also a member of the board of trustees at the Medicare Trust Fund. And Mitchell Daniels, senior vice president of corporate strategy and policy at Eli Lilly and Company, a researched-based pharmaceutical corporation. Marilyn Moon, we just heard from Bessie Johnson in that piece. She’s paying about $450 a month and only making $13,000 a year. How typical is that? How bad is the problem?
MARILYN MOON: That’s pretty typical. About one in every seven Medicare beneficiaries actually has out-of-pocket costs exceed $1,000 a year, and that’s going to get worse every single year.
ELIZABETH FARNSWORTH: By out-of-pocket, you mean for the drugs.
MARILYN MOON: That’s right. Just for the drugs alone.
ELIZABETH FARNSWORTH: Uh-huh. And how do you see the problem, Mitchell Daniels? How bad is it?
MITCHELL DANIELS: Bessie is the problem we should be worried about, and very much are. I think she’s an outlier at $450 a month, as Marilyn’s figures suggest, but it is unacceptable that anybody in this country, and particularly senior citizens for whom modern pharmaceuticals offer so much new hope, it’s unacceptable that anyone should lack them for financial reasons, and therefore, coverage that makes that access possible is essential.
ELIZABETH FARNSWORTH: And when you say, “she’s the problem we should worry about,” you mean mainly very poor people?
MITCHELL DANIELS: Yes. We should be focused on those for whom drugs are truly not affordable. Marilyn gave the same data that we’ve seen, about one in 14 seniors running drug bills a little over $100 a month out-of- pocket, and that can be a real hardship for those on fixed incomes without other means. And we ought to tailor a solution that has them uppermost in mind.
ELIZABETH FARNSWORTH: Marilyn Moon, do you agree with that– tailor a solution to people like Bessie Johnson?
MARILYN MOON: Actually, I think there’s a lot to be said for the notion of insurance, and that is that we will have coverage for everyone, even though not everyone uses it extensively in any given year. In fact, that’s the whole basis for having insurance.
ELIZABETH FARNSWORTH: So you mean not just for people who are, whose income is as low as Bessie Johnson’s.
MARILYN MOON: That’s exactly right. I think there are a number of reasons to think about this as a universal benefit, that it will help in a number of different ways, not only in terms of protecting individuals, but it also means that we won’t see a division of the Medicare beneficiaries into the rich and poor or sick and healthy, and that’s not the way to go in this program, I believe.
ELIZABETH FARNSWORTH: So does… What does that mean about how you see the Clinton administration approach? Do you support it?
MARILYN MOON: I think the basic approach is a sound one. I think there are number of things that can be done to improve it or change it, but I think the idea of making it available to everyone and providing subsidies that are bigger for lower income individuals makes a lot of sense.
ELIZABETH FARNSWORTH: And Mitch Daniels, how do you see the Clinton administration plan?
MITCHELL DANIELS: First, let me indicate that I agree with Marilyn that we would like to see coverage be universal. Two-thirds of seniors and high percentages of those under 65 do have coverage today. We’d like to see that be universal. I simply said that I think those…we ought to concentrate with special care on those people like Mrs. Johnson. The Clinton administration…
ELIZABETH FARNSWORTH: Actually, before I… I want to get back to the Clinton administration plan, but when you say two-thirds of seniors have coverage, they don’t have consistent coverage all year, is that right?
MITCHELL DANIELS: That’s correct. They have differing levels of coverage, and that’s, to an extent, probably appropriate, because their financial and health care situations differ widely.
ELIZABETH FARNSWORTH: Okay. Go ahead with the Clinton administration plan.
MITCHELL DANIELS: I think we should give the President and the administration credit for keeping the spotlight on this important issue. I think the plan they have put forward is flawed in every fundamental respect. Our position is that Medicare reform is urgent and should be comprehensive, not piecemeal. That is to say, there are additional problems beyond the lack of a prescription drug benefit. We also think that the prescription drug coverage should be integrated with the rest of healthcare coverage, otherwise important health care tradeoffs are not made. It’s a very backwards way of looking at health care to manage it component by component.
ELIZABETH FARNSWORTH: From a… Mitch Daniels, you would not support a plan which just looks at the prescription drug unit or element.
MITCHELL DANIELS: We think that really should be viewed as a last resort, and only as a default position if Congress proves unable to do what, I think a bipartisan majority is coming together behind Senators like Breaux and Kerrey on the Democratic side, and Frist and Hagel and others on the Republican side seem to be coalescing and bringing a lot of their fellow legislators along. I would say that the most grievous conceptual error in the administration plan, however, is its denial of choice to those seniors it intends to cover, and pitching them into a one-size-fits-all system of local monopolies is really a prescription I think for poor health care, and for short- sighted health care decisions.
ELIZABETH FARNSWORTH: Marilyn Moon, let’s take some of these points one by one. First, on the question of putting everybody together.
MARILYN MOON: I think that’s particularly important, because if we see great differences in health care coverage, particularly on the prescription drug side as well as other basic benefits, it’s a way of separating those who are healthy and those who are sick, and that’s not a healthy way to have an insurance program. So I think you need a core set of benefits that are very constant and the same for everyone. I think hospitalization is one of those cases. Certainly prescription drugs now qualifies in that category as well. So I believe to allow a great deal of diversity is actually harmful to the program, because it would mean that you would find the people who know that they need prescription drugs seeking the highest level of coverage. They’re going to be sicker than the average person, and it’s going to become increasingly expensive for them to get that coverage. It’s much better to pool all those risks in a reasonable way.
ELIZABETH FARNSWORTH: Okay, and before we go on to the other points, respond to that, Mitch Daniels.
MITCHELL DANIELS: No great disagreement. Marilyn makes a point we think is fundamental, which is that prescription medications are in some ways the heart of today’s health care system, and probably deserve to be in any coverage plan worthy of the name. The choice I’m concerned about is that which would be denied if every senior were forced into a single prescription drug coverage plan, as the administration bill contemplates. This probably also would lead to the displacement of large numbers of seniors from the coverage that they have today, something more like the president himself and all federal employees have in which an array of health care plans, all of which might have these core benefits Marilyn is talking about, but provides some variety to suit individual financial circumstances I think would be preferable.
ELIZABETH FARNSWORTH: Marilyn Moon, briefly respond to that, please.
MARILYN MOON: I think there’s nothing wrong with additional choice in the program. I don’t think we’re ready to chalk the existing program and start over again. We have a mechanism now to add additional private plans. We’ve had a troubled history, and we need to be very careful before we simply say we’re ready to go wholesale into that direction. The troubling situation we have now with managed care, the great difficulty and confusion that many beneficiaries feel when they face a lot of, a large number of choices, suggests that we need to go pretty slow in this area.
ELIZABETH FARNSWORTH: And Marilyn Moon, you’re a member of the board of trustees of Medicare. What about the point that Mr. Daniels makes that the whole system needs reform and pieces of it shouldn’t be pulled out for reform?
MARILYN MOON: Well, I think that we do need to look at a number of issues. This is a program that has never been sufficiently financed from its beginning, and that’s going to be an important issue. It’s going to take revenues, it’s going to take changes in the Medicare program over time, but I’m not sure that we have a system for reform that’s in place that really is ready to go from this point on. I would rather see a gradual transformation of this program over time.
ELIZABETH FARNSWORTH: Mitch Daniels on that?
MITCHELL DANIELS: Well, I defer to Medicare experts about the best way to go forward, but it seems to me that the opportunity really is here to start afresh. No one that I know of believes we would design Medicare today in its present configuration if we were starting anew, and I’m just very encouraged, and I think all Americans should be that there seems to be real momentum in Congress for true reform, which would include prescription drug coverage, but also address the more fundamental defects.
ELIZABETH FARNSWORTH: You say there’s real momentum. Has the situation changed, and do you believe there will be legislation this year?
MITCHELL DANIELS: I can’t speak as a person from outside Washington about what is or isn’t possible this year, but I sense that the hearing I was asked to appear before last week, a tremendous degree of interest and will in this subject, and an agreement about the fundamental problems that ought to be addressed, so I have to believe that at some stage this bipartisan sentiment will manifest itself in meaningful legislation.
ELIZABETH FARNSWORTH: Marilyn Moon, do you think it will?
MARILYN MOON: I’m a little more skeptical, because I think there are a lot of details that are really important to changes of the type that are being discussed here. And I think the first thing we have to keep in mind is what will work well for the most vulnerable beneficiaries, and I’m not sure instantly moving to a system of opening up the program and requiring people to make choices among private plans and pushing them out of the basic Medicare program is the best way to go.
ELIZABETH FARNSWORTH: Well, Marilyn Moon, Mitchell Daniels, thanks for being with us.
MARILYN MOON: Thank you.