Bruce Vladeck

SUSAN DENTZER:

Medicare is playing a huge role in this campaign. Why do you think Medicare is so controversial this year?

BRUCE VLADECK:

Well, for many years Medicare has been one of the most popular programs in the public mind. It's been associated with the democrats. It was a democratic initiative. I think the Administration by the trick of pre-empting the democratic issue by taking on the prescription drug issue, including their prescription drug bill, that they made such a hash of it because of the mess of it, it, I think it's going to turn out to be in many ways [ paramount] issue.

SUSAN DENTZER:

The President repeatedly says he succeeded in getting the–leading the Congress to modernize Medicare. That as of 2006 seniors will have prescription drug coverage, that all of this is a great improvement in the program, and that beneficiaries should understand that they've got these benefits ahead of them and that it's going to be a great addition to the program.

BRUCE VLADECK:

Well, that's a lot, to me that's a lot like saying last May that the invasion of Iraq was a great investment. The fact of the matter is, it's not a very good method. And total out of pocket [costs are] going to go up while the drug coverage is going to have major holes in it.

SUSAN DENTZER:

And specifically you're talking, among other things, about the doughnut?

BRUCE VLADECK:

I'm talking about the doughnut. I'm talking about the general inadequacy of the benefits for most of, most Medicare beneficiaries on average, except the low income beneficiaries, cover barely 25 percent of the prescription drug cost of most beneficiaries. And that's even assuming that drug prices don't start going up at an even higher rate than they have in the past.

SUSAN DENTZER:

Senator Kerry has zeroed in on a couple of additional features of the bill that he says are very problematic, one of which was that there was specifically a provision that in effect prevents the Secretary[of Health and Human Services] from negotiating drug prices with pharmaceutical companies. Why is that a problem? Senator Kerry has talked about, assuming he is elected, reopening that provision of the Medicare law. What do you think he specifically proposes to do?

BRUCE VLADECK:

Well, if you look at what's happened to healthcare costs over the last five or six years, break it down by sector by hospital, physician, laboratories, whatever, and then by prescription drugs, which are a growing share of healthcare for everyone, the fact of the matter is that Medicare cost for hospitals, for physicians, for laboratories, for just about every category, its covered paths are going up less quickly in private markets, in private healthcare because Medicare uses its market power to have some influence over the prices they charge and that the beneficiaries are charged for those services.

SUSAN DENTZER:

So do you think if he is elected Senator Kerry will, in fact, propose that that provision of the law be stricken and that there, in fact, be government negotiation of these prices?

BRUCE VLADECK:

If Senator Kerry is elected President, he will try to get legislation to give Medicare the authority to negotiate drug prices just as the Department of Veterans Affairs or Medicaid Programs or the Indian Health Service already negotiate the prices of drugs they purchase.

SUSAN DENTZER:

The other thing the Senator has backed is importation of drugs. He specifically seems to have limited that to Canada in most of his campaign addresses. What do you think he proposes to do on that score?

BRUCE VLADECK:

Well, there's legislation already in the congress which I understand he supported that would permit the importation of drugs from any industrial nation that could meet FDA safety standards including most of Western Europe. It's really striking to me the extent the [inaudible] administration which has opened up imports from Europe which has opened up agricultural imports from all over the world which is expanding textile imports is all in favor of importing everything but prescription drugs. Despite the fact that that's the most rapidly growing expense for [inaudible]. So I think that would change.

SUSAN DENTZER:

Although it is the case also that even Secretary Shalala confronted with the same issue, issued a finding that she could not guarantee the safety of drugs imported from other countries into the United States.

BRUCE VLADECK:

Well, that's why the legislation is pending in congress, which the Administration is bottling up, deals with the issue of FDA resources. But I'd also point out that when Secretary Shalala made that decision, drugs cost 70 percent less than they do now.

SUSAN DENTZER:

So the cost equation has changed so much that this issue has to be looked at again you're saying?

BRUCE VLADECK:

I think we've learned from state programs and others that the safety issue is 90 percent red herring.

SUSAN DENTZER:

Okay. Let's go to the issue of the Part B Premium going up. The Administration is making the point that [the increase] reflects more benefits for beneficiaries that were put in place in the Medicare Modernization Act. That they have to pay a share of that because this is driven by a formula that has been in place for some time. And that beneficiaries, yes, are going to pay more, but they're going to get a whole lot more for these higher premiums.

BRUCE VLADECK:

Well, the cost of the new benefits is tiny compared to the total volume of the program or the total volume of the premiums. All of the new benefits included in the legislation next year are going to cost something like $200 or $300 million. The program is going to spend $130 billion. So that's just not a credible argument.

There is, there is a lot of money in the new legislation and that is reflected in the premium increases. It's going to raise payments for HMOs and other private managed care plans.

There are three things to say about the premium increases. First of all, health care costs are going up at a relatively rapid rate. There's been no effort on the part of the Administration to do something about that. Second, there is an effort throughout the legislation to increase beneficiary responsibility for costs. The third, there's another somewhat complicated factor I will note. You recall last spring when there was all the controversy about how the Administration had hidden internal reports by the actuary about how much this legislation is actually going to cost and kept them from coming to congress. But the same actuary makes the estimate on which the premiums are based. So while the Administration last fall was telling the congress this legislation was going to [inaudible], when their own actuary was telling them it was going to cost $540 billion. The new premium from that on the basis of the actuary is going to be higher.

SUSAN DENTZER:

So what does that tell us?

BRUCE VLADECK:

What it tells us is that they said, the Administration said one thing in November when the bill was before the congress and they're saying another thing in September. Maybe you could call that a flip-flop. I don't know.

SUSAN DENTZER:

To the degree that the Administration is arguing that this is beyond its control, how credible is that argument?

BRUCE VLADECK:

Well, all I can say is the following. In eight years of the Clinton Administration, the Part B Premium went up 35 percent total over eight years. Four years of Bush's Administration, it's gone up 56. As you know, the Clinton Administration was very active sometimes, sometimes not in efforts to do something about the healthcare system. Now, the current Administration has done nothing. So obviously they're not responsible for everything. But they've had a policy of neglect of health care generally. And I think part of that's reflected in the increase in Part B.

SUSAN DENTZER:

Let's move to the area of the long term projections of Medicare out of pocket payments for beneficiaries and how much of a share of their Social Security benefits those out of pocket expenditures will take up. We have new data that the actuary released in July, finally, after prodding. And that seems to show obviously that beneficiaries are going to see an increasing share of their Social Security checks in effect eaten up by these higher Medicare out of pocket payments.

BRUCE VLADECK:

There's no question about that. And there are two reasons for that. A major reason for that is, again, because the drug benefit is really so limited and has no cost containment provision in it. While the Administration is now touting this great, wonderful service they provide for beneficiaries, in fact, the beneficiaries are going to practically shoulder the overwhelming portion of the cost at the outset. And the amount they're going to have to pay to get their drugs is going to go up pretty dramatically in the years hereafter. On top of that, there are a number of provisions in the legislation that passed that also shift costs to beneficiaries.

There's an increase in the Part B deductible for the first time in years. There are changes in the way that managed care plans and HMOs are paid. That's going to increase the financial risk for beneficiaries. I think the share of the program costs that are going to be borne by beneficiaries, if they do not change this legislation, I would say is going to go up. Not to mention the fact that health care costs are going up. So you have costs increasing and you have the beneficiaries share increasing. And given how limited the incomes of most of the elderly [inaudible] are, it's going to take a bigger chunk out of their total income.

SUSAN DENTZER:

So how much of this can be pinned on the President?

BRUCE VLADECK:

Well, you know, you get down to sort of nibbling at political argument, and I don't want to get into any details, because it gets silly at some point, but I think it's fair to say that the legislation which he proudly points to as a major accomplishment increases the out of pocket costs of beneficiaries, does nothing to change the rate of growth of Medicare costs, and sets us further down a path of shifting more and more to the beneficiaries.

The fact is that this Administration is boasting about the legislation it passed last year. Yet it's going to have a very significant affect on the out of pocket costs of health by beneficiaries over the next couple of decades in part, again, because it's going to have an inflationary affect on their drug expenditures and it's going to increase their out of pocket expenditures in part because of a number of other provisions in the legislation that are designed to increase the beneficiaries share of the cost over time. While there's nothing in the legislation that does anything to contain the rate of growth of health care costs under the Medicare program. So they're going around boasting about this legislation, which I explained, is going to have a calamitous affect on the finances of millions of elderly and disabled people with a very limited income.

SUSAN DENTZER:

Isn't it fair to say, though, that beneficiaries if this law had not passed would be bearing a lot of those drug costs themselves anyway? They just wouldn't have shown up as Medicare out of pocket payments, they would have just been plain old out of pocket payments for huge drug expenditures?

BRUCE VLADECK:

I think that, I think that is true, Susan. But I think, in fact, it's very hard to argue that any significant number of beneficiaries [is] any better off as a result of this legislation. And certainly some retirees with removed benefits are going to be worse off. Certainly some low income folks in New York, for example, who had their drugs covered by Medicaid in the past, are going to be worse off under this new legislation than they were. So that those who benefit from it, the benefits are generally quite modest and they are losers as well.

So the problem of drug costs, I think, the right way to respond to your question, has not been adequately addressed, let alone fixed by this legislation. It's going to be with us, it's with us still unless we take further action about drug prices and the way in which [inaudible] drugs.

The fact is that this legislation really does nothing to address let alone solve the problem of high drug costs for seniors. It, in fact, has inflationary mechanism built in. Some beneficiaries will be better off with the benefit, but millions of retirees who lose retirement benefits are going to end up with worse coverage. Millions of Medicaid, of low income Medicare beneficiaries in States like New York are going to end up with less good coverage than they have now. And at the root the problem of growing health care and drug costs has not been addressed at all in this legislation and is going to continue to get worse until a new administration does something about it.

SUSAN DENTZER:

The [Bush] campaign is saying is that for all the critique that Senator Kerry is laying on the Medicare Modernization Act, he was AWOL in the shaping of that legislation, that he missed something like 37 out of 38 or 38 out of 39 votes on the legislation, and that if he thought it was so bad, he had an opportunity to participate in making it different, but did not.

BRUCE VLADECK:

You know, that's the moral equivalent of the kid who chooses his parents and then asks for mercy because he's an orphan. I mean, the way the legislative process was run on this legislation last year by the majority in both houses of congress really shut out most of the democratic group in both the House and Senate to any useful participation. In fact, most of the democratic members of the conference committee weren't even invited, you know, later in the process weren't even invited to the meeting, weren't even told where the committee was meeting. So anything that Senator Kerry had tried to do to change this freight train that was being run by Senator Frisk and the White House would have been a waste of his time. The views of most of the democrats in the Senate and the House were not given a hearing.

SUSAN DENTZER:

The Bush Campaign is also pointing to the Senator's critique of the higher payments in the Medicare Modernization Act to health plans and saying that, in fact, Senator Kerry had written HHS on a number of occasions prior to the passage of the law in support of higher payments to Massachusetts health plans.

BRUCE VLADECK:

Well, one of the things that happened with legislation about payments to health plans beginning in the mid-1990s has been a classic congressional allocations fight. And one of the things that happened about the Budget Act of 1997 was that a ton of money was moved away from the big urban centers of the northeast, including Boston and New York, so I'm particularly sensitive to this issue, to rural communities in the Midwest and the South. For the Senator from Massachusetts to try to get some of that money back in a classic congressional tug of war over how money is going to be allocated, if he didn't do that, I'm sure they'd be accusing him of dereliction of duty.

SUSAN DENTZER:

So in effect you're saying that when the Senator was writing those letters, he wasn't necessarily advocating for the huge, in effect, $10 billion worth of stabilization to health plans, he was just saying that if you're going to throw some more money at health plans, distribute it our way as well?

BRUCE VLADECK:

I think that's right. I think a senator has an obligation to look out for the interests of his constituents in his state. I think the President has an obligation to look out for the Medicare beneficiaries. And I think Senator Kerry was doing a better job of his job than President Bush was doing of his. [He] was doing his job as the Senator from Massachusetts in trying to redirect some of those changes, get some of that money back to his state in one of these classic congressional tugs of war over whose, you know, district is going to get the money.

SUSAN DENTZER:

So you're saying that's different from arguing that there needed to be $10 billion of additional payments to health plans in the Medicare Modernization Act?

BRUCE VLADECK:

That's been a, you know, I think that the obligation of a senator is to protect the interest of his constituents, particularly relative to constituents of other senators, while the obligation of the President of the United States is to protect all citizens, including all Medicare beneficiaries. And I think if the Administration continues to make that argument, the rebuttal of the Kerry folks ought to be that Senator Kerry in that period of time was doing a much better job in fulfilling his responsibilities than the President was doing in fulfilling his.

SUSAN DENTZER:

Given the complexities of health policy, would you say that the level of the debate over all of this in the campaign is doing justice to the complexity and the importance of these issues?

BRUCE VLADECK:

You know, it's hard to say. The level of debate on health policy as reflected in the media is not doing justice to the complexity of the issue. And to the extent that this is being waged entirely in sound bites and attack ads, it's obviously not doing justice to the complexity of the issue. I think if you go to the candidates' Web sites you can get an understanding of what their views are. Of course, there's no dialogue. It's just a statement of position. But nobody does that. And so, again, like every other issue, there are just sound bites and attack ads.

SUSAN DENTZER:

Who is going to capture the hearts and minds of Medicare beneficiaries? Which of these two candidates do you think is going to win the hearts and minds of most Medicare beneficiaries in this election year?

BRUCE VLADECK:

Well, again, you're, you're sort of getting out of my sphere in terms of political expertise. But what I, what I see in the news accounts and the polls is the more the President seeks to identify himself with the new prescription drug legislation and the more Medicare beneficiaries actually learn about the legislation, the better that's going to be for Kerry.

The legislation is a very hollow promise for many beneficiaries. It's got a lot of booby traps in it that people are beginning to–it's really not a very beneficiary piece of legislation. And it's a lot of, a lot of tinsel and veneer without a lot of solid benefits. And I think people are gradually catching onto that. And the more they do and they more they associate it with the President, the better that's going to be for Senator Kerry.