Medicare “Reform”: A Sugar-Coated Poison Pill

by Joe Auciello


In the week before Thanksgiving, the House of Representatives began to reshape the American health care system for the worse by approving legislation that would undermine the Medicare program. Days later, the Senate followed suit, and the nearly $400 billion “Medicare Reform” was passed into law.

These controversial measures, promoted and won by a Republican majority in Congress, hardly merit the word “reform.” Actually, Congress has created a sugar-coated poison pill.

The Republicans, of course, proudly announced that this new legislation would be a boon for the American people in general and for senior citizens in particular. President Bush claimed, “This historic legislation is the greatest improvement in senior health-care coverage since the enactment of Medicare in 1965. And I look forward to signing this important piece of legislation.”

Such predictions are not merely exaggerated; they are simply wrong. The overall effect of this new law, both in the short and long-term, will be harmful to most seniors.

This “reform” will enable private health care firms to compete with Medicare, which means that the guarantees of a federally entitled program will be eroded. The reform bill provides seniors with a financial incentive to leave Medicare for a private health insurer. Premiums would rise for those who remained in Medicare either by choice or because they were too sick to be accepted by private companies. The likely effect of higher premiums would be for more seniors to leave, which would only continue to raise costs for those seniors whose poor health made them unprofitable for private insurers.

Some real benefits are included in the reform package. The bill does give, for the first time, prescription drug assistance to the 40 million elderly and disabled enrolled in Medicare, paying 75% of costs up to $2,250 a year, after a $250 deductible. But seniors will not receive these benefits until 2006, although a drug discount card is expected to be available next year. Nonetheless, the elderly will not be the main beneficiaries of the new Medicare program.

This new bill will shift wealth, in the form of direct payments and tax benefits, to insurance and medical corporations. According to the Nov. 26 Boston Globe, “Drug makers stand to reap the biggest rewards from the $400 billion Medicare drug benefit approved yesterday by Congress, but a host of other players also stand to benefit, from doctors to hospitals to the makers of orthopedic shoes.”

The Nov. 24 Washington Post reported that the new legislation “would steer at least $125 billion over the next decade in extra assistance to the health care industry and U.S. businesses…” The same article quotes Thomas A. Scully, federal administrator of Medicare and Medicaid, who said employers “should be having a giant ticker-tape parade” because the bill provides corporations with money “way beyond their wildest requests.” He was referring in part to the $86 billion in direct payments and tax benefits to companies that would retain health care coverage for retired workers.

The financial incentives to the companies are insufficient to reverse the corporate cost-cutting which results in cutting back or eliminating health benefits. “The Congressional Budget Office estimates that 23 percent of employees—or 2.7 million people—who are now receiving drug benefits from their employers will lose those benefits after the Medicare drug program is instituted in 2006.” (New York Times, Nov. 26, 2003.)

Furthermore, the Medicare package is a gift to the pharmaceutical industry. The bill has no federal price controls which might have limited corporate profit; additional federal money means new business and higher sales of medicine; and the bill rejected a proposal to import drugs from Canada, where medicine sells for considerably less than it does in the U.S. Under the Medicare reform law, drug prices will be determined by the drug companies and private sector insurance.

Promptly following passage of the Senate bill, the Business Roundtable, a kind of central committee of corporate CEOs, and the American Medical Association, praised the new legislation. The AARP, the largest senior lobbying group, had already given its support to the Republican plan.

The Medicare bill drew fire from conservative Republicans and liberal Democrats. Fiscal conservatives object that the new package gives away too much now and is likely to be more costly in the future. While noting that passage of the bill means “Mr. Bush will have helped his chances of re-election,” the Economist magazine complained, “That still does not mean it is a sensible idea. At a price-tag of $400 billion over the next ten years (and far more thereafter), the plan dramatically expands an already unaffordable scheme…As so often with Mr. Bush’s budgeting, America’s long-term fiscal health is being mortgaged for short-term political gain” (The Economist, Nov. 22, 2003).

Massachusetts Senator Edward M. Kennedy criticized the Republican bill as “a calculated program to unravel Medicare, to privatize it, to voucherize it, and to force senior citizens into the cold arms of HMOs” (Boston Globe, Nov. 27, 2003). The Democratic senator had originally drafted Medicare reform proposals that added prescription drug benefits (though Kennedy‘s bill also disallowed the use of less expensive medicine from Canada). The Democrats lost control over the legislation when it went into congressional committees stocked with a majority of conservative House Republicans.

The Medicare bill is an undoubted victory for President Bush and his party. Democrats, however, share a measure of the blame for the new program. Passage of the House bill could have been blocked in the Senate, but the 54 – 44 Republican victory included eleven Democrats who joined the Republican majority. Senate Democratic leader Tom Daschle opposed a filibuster that Sen. Kennedy had threatened, thus ensuring the legislation would pass. The Democratic presidential candidates who could have cast an opposing vote in the Senate, John Kerry and Joseph Lieberman, chose to leave Washington before the vote was taken.

The Medicare reforms will enable the health care industry to do better in its primary purpose of making profits. Instead, the richest nation on earth should provide adequate health care as a human right available to every man, woman, and child.