November 15, 2000

November 15, 2000 | Commentary on Health Care

The Real Choice on Medicare

At first glance, there doesn't appear to be much difference between liberals and conservatives when it comes to prescription drugs and Medicare. Both sides want to add a drug benefit to the program. Both talk about providing full drug coverage for low-income seniors and partial coverage for seniors with slightly higher incomes. Both emphasize the need for catastrophic coverage of drug costs.

But there's a key difference, and it can be summed up in one word: control.

Who will control the drug benefit? How will it be financed, and how will it be delivered to seniors? Here the difference between the two sides becomes stark.

Conservatives advocate a reform that would allow seniors to get their drugs through personally selected (but government-approved) private plans. This system would mirror the Federal Employees Health Benefits Program (FEHBP) that covers members of Congress and their staffs, as well as 9 million federal employees and retirees and their families. Every enrollee can choose from a variety of plans, including fee-for-service, PPOs and HMOs. And each plan covers prescriptions; in fact, virtually all cover 80 to 90 percent of a patient's drug costs. As a result, FEHBP enrollees don't have to buy extra insurance, as Medicare patients do today, to guard against the high costs of a long-term, serious illness.

Under a patient-choice system, seniors would have real control. They could decide the level and kind of drug coverage they need. Their doctors could advise them on the best plan, and they would be free to choose the most effective drugs, including new, breakthrough drugs - yes, the ones that are frequently the most expensive - that are driving this whole debate.

But most liberals shun a market mechanism. They would graft drug coverage directly onto the current Medicare program. Seniors would pay an additional monthly premium (on top of the premium they already pay, scheduled to rise to $49.30 next year) in return for a federal subsidy that would cover a portion of all drug costs.

This design makes a big difference. If the Medicare bureaucrats and their contractors control the financing and delivery of the drug benefit, then they will control which drugs seniors get, how they get them, when they get them, and under what circumstances they get them.

The cost of such a plan could also affect seniors' control. Most already have drug coverage, and the largest number of them with such coverage get it through their former employers. If the government picks up first-dollar costs of drugs, and then promises to pay all catastrophic drug costs, employers will have a powerful incentive to dump retirees out of their private coverage. Millions of retirees with such coverage could be forced into the government drug plan.

Bear in mind, too, that the added premium most liberals back is artificially cheap. It will encourage doctors to write prescriptions like mad, kicking off big drug-cost increases. And what if drug costs surpass government estimates, and the premiums won't cover them? Congress and the White House could resort to large tax hikes. They could sharply increase the drug premiums for seniors. Or they could take the indirect approach: Reduce the supply of drugs by paying less for drug coverage.

Government officials did this recently when they reduced Medicare payments to hospitals, home health care agencies and nursing homes. The result: a cutback in services. And the White House this summer proposed cutting payments for cancer drugs already covered by Medicare, including chemotherapy for breast, colon and lung cancer. As Rep. Nita Lowey, D-N.Y., correctly noted, such cutbacks could make it "financially impossible" for cancer specialists to serve seniors who need such treatments.

The fact is, you can't get more by paying less. Congress and the White House won't call Medicare payment reductions "price controls," but they'll guarantee the same miserable effects.

FEHBP enrollees, of course, don't wrestle with anything like Medicare's red tape or cumbersome payment systems. They have one plan, one premium, and a wide range of health-care options with drug and catastrophic coverage. That's why most members on a bipartisan Medicare Commission that studied Medicare last year endorsed a similar system for seniors.

Congress already enjoys access to an array of superior health plans with solid drug coverage. Don't Medicare enrollees deserve something at least as good?

Robert E. Moffit, Ph.D.  is director of domestic policy studies at The Heritage Foundation, a Washington-based public policy research institute.

About the Author

Robert E. Moffit, Ph.D. Senior Fellow
Center for Health Policy Studies

Related Issues: Health Care

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