Private insurance and pharmaceutical companies 1, seniors 0. Yes, the medical/health monopolistic private sector has prevailed once again. The major focus of the Medicare prescription drug bill has been on the prescription drugs-for-seniors component. An evaluation of this legislation triumphantly signed by Bush last December, shows that its major beneficiaries will be the medical/health monopolies. It does little or nothing for seniors.

In the next two to three years we will witness an astronomical rise in the cost of prescription drugs. Nothing in this legislation prevents it. As new drugs enter the market and with increases in the volume of sales of these drugs, the rise in drug costs will be dramatic. Wall Street is already predicting that higher costs could amount to a windfall of approximately $13 billion annually.
Lobbyists for the medical/health monopolies assured this condition of price gouging by pushing for a provision in the law that prevents the federal government from bargaining for lower cost prescription drugs. The law also limits the re-importing of cheaper drugs from Canada. Approval for drug re-importation from Canada or other countries will require the signature of the secretary of Health and Human Services. The secretary will determine if the drug in question is safe and costs less. The current secretary has expressed in various ways that we shouldn’t expect such certification. This will be a serious blow to seniors who have come to rely on cheaper drugs from Canada.

This legislation is also designed to force seniors into privately managed health care plans. At the same time, the law provides the private insurance industry with incentives to go “cherry picking,” that is only enrolling the youngest and healthiest seniors. There are no mechanisms in this legislation to prevent this.

Another major flaw in the legislation is commonly referred to as the “donut hole.” It works like this: estimate the premium that a senior pays currently at $35 a month. (By time the drug benefit begins in 2006 it will probably be higher.) But, let’s say it is $35 a month or $420 annually. In addition, the senior will pay an annual deductible of $250 ($420 + $250 = $670). Now, the drug plan will pay 75 percent of the drug costs, leaving the senior 25 percent until the total drug costs for the senior reach $2,250. After the senior reaches the $2,250 in drug expenses in a given year the coverage stops. The senior now pays the next $2,850 in all drug expenses ($5,100 - $2,250 = $2,850). This amount can have a very negative impact on a senior on a fixed low income. $5,100 is the amount the senior has to reach before the coverage starts again. This gap in coverage is the “doughnut hole.” In the course of a year a senior could pay as much as $250 + $420 + $ 2,850 = $3,520 until coverage kicks in again. Once it reaches $5,100 the senior qualifies for catastrophic insurance. For the rest of the year the senior pays a $2 co-payment for every generic drug or $5 for every brand-name drug (estimated by some to be as high as five percent of costs above $5,100). It is obvious that the deductible and even the premiums may grow each year depending on the anticipated increases in drug expenses.

Economists have shown that drug prices increase significantly faster than inflation. Also, one can anticipate that the amount a senior will pay will grow faster than his/her income.

The major threat to Medicare will come from the so-called demonstration projects. Demonstration projects are being designed for six areas of the country (not yet selected) beginning in 2010. They will have the private insurance plans and the traditional Medicare plans operating side by side to determine which plan is most effective and efficient in providing drug coverage. The demonstration projects are a process for “fixing” the outcome and have been designed to ensure that the Medicare program ends up in the greedy hands of the private insurance companies. During the demonstration projects the traditional fee-for-service component will compete with the private insurance plans. Traditional Medicare has and will continue to serve the most vulnerable and expensive population of recipients, those with more severe health problems. It is obvious that the cost will be higher among this population. Bush’s bill calls for the extra costs to be passed on to this very vulnerable population of enrollees.

This extra cost is expected to force seniors to opt for the private plans in their efforts to survive financially. In the end what will the demonstration projects tell us? They will say that it is time to privatize Medicare because privatization is more economical and efficient. This legislation is as “fixed” as the Florida elections.

The main result of the Medicare prescription drug bill is that the private insurance and drug companies have gained a significant foothold in this cost efficient government program. The goal of the Bush administration and the medical/health monopolies is the privatization of Medicare. Privatization, they claim, is necessary to save on administrative costs of the program. What they don’t say is that the administrative costs of Medicare are far lower than the private insurance carriers. In fact, the General Accounting Office (GAO) a few years back projected that the difference between the high administrative cost of the private insurance sector in the US and the relatively lower administrative costs of the Canadian Health System could be used to cover the 40 million uninsured people in the US.

So, with billions of dollars at stake, the medical/health monopolies have little or no interest in the right of seniors to prescription drugs and good quality of life. With this political momentum under the direction and leadership of the White House the question is what’s next for health care legislation? One can only wonder or imagine what the future holds for Social Security, national health insurance, and other health and welfare policies.

--Edwar A. McKinney is a senior advocate in Cleveland, Ohio.