The Medicare Bamboozle: Part II

[Disclaimer: This post was first published on Coleen Rowley's campaign weblog.]

An earlier post discussed recent TV ads which the U.S. Chamber of Commerce purchased praising John Kline and Mark Kennedy for their support of Medicare Part D and its prescription drug provisions. The chief goal of the ads was to keep two of the Chamber's most reliable supporters in Congress, but a secondary goal was to convince voters that Medicare's prescription drug program is a good thing for consumers.

It's not. In fact, it may very well be the worst piece of legislation ever enacted. And that's not just my opinion.

The major provision of the prescription drug program which is causing problems for many seniors right now is the so-called 'donut hole'. In order to keep the cost of the program merely outrageous instead of obscene, the coverage is set up to pay 75% of drug costs until you've purchased $2250 worth of prescriptions. After that, you're on your own for the next $2850 (95% of costs beyond that are covered). Estimates on the number of seniors who will fall into the donut hole vary, but everyone agrees it will be more than 3 million:

Advocacy groups and some independent health analysts have warned of serious health consequences for older and disabled Americans living on low or moderate fixed incomes. Their resources, though minimal, often are too much to qualify for extra help. They face difficult choices, advocates fear: buy medicines or food and other necessities?

The donut hole problem is exacerbated by another horrendous provision of the bill: Medicare is explicitly prohibited from negotiating with drug companies for lower prices. By one measure, this provision has led to a 48% increase in drug costs, pushing more seniors into the donut hole sooner.

But wait, there's more. Since Medicare covers a substantial portion of drug costs --- at least until the donut hole kicks in --- the American taxpayer is also paying higher prices. And it doesn't end there. In today's global economy, drug companies sell their products all over the world, in countries which already have some form of universal health care. The governments in these countries do negotiate lower prices with the drug companies, which make up the difference by raising prices in the U.S. So in effect, the U.S. taxpayer is subsidizing health care in Canada, Great Britain and Japan. So much for John Kline's claim to be a friend of the taxpayer.

Indeed, the plan is such a blatant giveaway to big pharma, even conservatives are disgusted with it. Bedrock conservative Bruce Bartlett, writing for the Cato Institute, points out yet another flaw in the plan:

. . . the drug program would reimburse corporations for the drug benefits they were already providing to their retirees. The federal government would send huge checks to some of the largest corporations in the United States for the costs that they were already contractually obligated to pay. The final legislation provides a 28 percent tax-free subsidy that is expected to average $660 per retiree per year.

The numbers are huge. After passage of the legislation, the Wall Street Journal reported that General Motors anticipated receiving $4 billion to cover its prescription drug costs. Other recipients included Verizon ($1.3 billion), BellSouth ($572 million), Delphi ($500 million), U.S. Steel ($450 million), American Airlines ($415 million), John Deere ($400 million), United Airlines ($280 million), and Alcoa ($190 million).

. . . I believe that the Medicare drug bill may well be the worst piece of legislation ever enacted. That it was enacted by a president and Congress controlled by my party is a source of great distress to me. It will cost vast sums the nation cannot afford, even if its initial budgetary projections prove to be accurate, which is highly doubtful.

And it doesn't end there. Readers who want a more comprehensive accounting of the problems with this program can read the analysis Consumer's Union did just before the bill was passed (PDF).

It's clear that this bill was written for the good of the drug companies who contribute so generously and reliably to Republican candidates (John Kline has received nearly $100,000 in campaign contributions from the pharmaceutical and health products industries). This bill is a perfect microcosm of the Republican culture of corruption in action.

And that's not taking into account the remarkable stunts the Republicans played to get the bill passed in the first place, which we'll discuss in the next post.

This is part one of a four-part series on the Medicare Bill.  Make sure to read them all!

1. The Chamber of Commerce and its support for Kline and Kennedy.
2. The worst piece of legislation ever enacted.
3. The Republican culture of corruption in microcosm.
4. John Kline's bold stand and subsequent crumbling.