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Volume 56, No. 10 October 2000

SAVING MEDICINE

"Feed me," bleats the little carnivorous plant plaintively in the off-beat movie Little Shop of Horrors. As it is fed, it grows. And as it grows, it demands, in an increasingly stronger and harsher voice, to be fed more and more. Eventually, it becomes huge, with an insatiable appetite.

"The metaphor goes only so far," editorializes the Calgary Herald of May 31, 2000. "Public health care in Canada is not a malevolent entity. It was founded on the best of intentions."

Carnivores aren't malevolent either; they act according to their nature. The first persons to feed the plant, when it was small, benign, and pitiful, presumably had good intentions.

The U.S. private variety of the OPM (Other People's Money) poppy was planted in World War II and nurtured by wage and price controls. The public variety flowered in 1965 with the passage of Medicare. It continues to send up branches, most recently the one called SCHIP or State Children's Health Insurance Program, part of the Balanced Budget Act of 1997.

The two varieties are in competition. As the enrollment of eligible children in public programs increased from 10% to 14% between 1996 and 1999, enrollment in employer-sponsored coverage decreased from 72% to 66%, and the percentage uninsured remained around 20% (WorldNetDaily 7/2/00).

The "low-cost" [to families] SCHIP program covers about 2.6 million children for $24 billion (about $10,000 each). Al Gore proposes expanding it to another 1 million children for $42 billion (or $42,000 each) (WorldNetDaily 8/18/00).

While expanding public insurance, as by adding a prescription drug benefit to Medicare, politicians talk in the same breath about the need to "save" it-that is, to feed it more. Since 1966, Medicare Part A has resulted in 36 tax increases, and the beneficiary share of Part B has dropped from 50% to 24%. Clinton-Gore and most Congressmen propose to dump huge portions of the projected but dubious future budget surpluses (resulting from massive tax increases) into Medicare.

For those who actually provide medical care, of course, a stricter diet of price controls is in the works.

In 1960, 75% of national medical spending was financed by the private sector, and 48.7% was paid out-of-pocket. By 1998, the private sector share had decreased to 54.5% (and out-of- pocket to 17.4%), while the government share increased to 45.5%. The Clinton-Gore objective of finishing the job and nationalizing the whole enterprise has not been forgotten; the campaign has shifted to the states. Gore has his sights set on Maryland. MedChi will consider an endorsement of "universal" care at its annual meeting on September 9.

One must ask: why should we want to save-and grow- a ravenous carnivorous plant? Its nature is becoming obvious, even to Canadians, who are now hiring more health care cops instead of urgently needed doctors and nurses. The answer can only be that people do want to save medical care, but have it confused with Medicare or another "healthcare plan." Because of the demographic bomb, Medicare is probably unsalvageable. It is clearly impossible to save both medicine and Medicare.

It is imperative that we begin to starve the carnivore, and turn our attention to financing medical care with private savings [not OPM], rather than government takings.

There is plenty of opposition, of course, not the least from insurance agents. But as agent/broker Joe Pugh has pointed out, "Agents are like frogs caught in a muddy rut in the road and unable to get out-until a Mack truck approaches." Politicians are probably like that too.

Potential sources of savings abound:

1. Reduce takings by government and health plans. This requires tax code changes to stop rewarding the shift from direct (out-of-pocket) payment to third-party payment (with OPM). The Medical Savings Account trial needs to be expanded, but also changed to permit more flexibility and higher deductibles, preferably increasing yearly as savings grow. Consumers should demand MSAs that are unencumbered with the equivalent of claims processing. Expenditures need review only if the deductible is exceeded and an insurance claim is to be filed. It is imperative that younger persons start MSAs now that can carry over into retirement to avoid dependency on the bankrupt Medicare welfare system-and that government allow the investment of the so-called Medicare premium in a personally owned insurance and savings product.

Regulatory takings also need to be reduced by the repeal of insurance mandates as well as other costly requirements such as the Clinical Laboratory Improvement Act. It is very difficult to estimate the total regulatory burden; Peter Ferrara of the Cato Institute makes a conservative estimate of $1 trillion per year- around $4,000 for every man, woman, and child.

2. Encourage technologic innovation that empowers consumers. We must not permit government and special interests to curb the power of the internet to reduce transaction costs and facilitate competition on the basis of both quality and price (see p. 3).

3. Encourage thrift by demanding responsibility. The OPM-induced entitlement mentality starts a vicious circle. The ready, nonstigmatized availability of a safety net creates more need for it. It is feared that people will waste their earnings (if they are not taken so the government or health plan can waste them)-and they do. Craig Cantoni estimates that the average American could save $300,000 over a lifetime by buying a moderately priced car for cash instead of credit, keeping it for 10 years, and investing the savings. MSAs could help overcome a broad and serious cultural/educational problem.

If we do not want the whining, bleating, ever-hungry and pathetic socialist monster to devour us, we have to recognize its evil nature and stop indulging it.


Single Payer Updates

Brain Drain. For every 20 doctors and 15 nurses who leave Canada for the U.S., only one of those professionals heads in the other direction. CMA President Dr. Hugh Scully reports that 50% of Canadian medical school graduates emigrate within 10 years of graduation, and an additional 25% within 15 years, primarily because of lack of resources to do their jobs. And medical school spaces were recently cut by 17%. There is an urgent shortage of specialists such as radiologists, and even family doctors can be hard to find. Up to 42% of family doctors are refusing new patients (Calgary Herald 5/31/00). Canada is accused of "pillaging" less-developed countries such as South Africa for physicians (Lancet 7/14/00).

Canadian Medicare Revisited. Federal and provincial government payments now cover only 69.4% of Canadian medical expenditures, with private insurance and out-of-pocket payments picking up the cost of outpatient prescriptions, dental care, rehabilitation, home health, nursing homes, extra-duty nurses, and other noncovered items.

Public support is eroding as the system shows clear signs of deterioration. The policy of restricting supply as the main method of controlling expenditures is having "unforeseen consequences" (Iglehart JK, N Engl J Med 2000;342:2007- 2012).

Fundamental design flaws must be corrected, and innovations such as medical savings accounts are needed. But politicians and the public are "Operating in the Dark," states the Atlantic Institute for Market Studies (www.aims.ca). Although the present system is unsustainable, "any deviation from command-and-control is condemned as an attack on Canada's core values (Ottawa Citizen, 7/16/00).

Debate Obsolete. The internet is a "direct threat to universal public health care," writes John Ibbitson. "As free trade always does, it will expose the inefficiency and state- sanctioned corruption of our centrally planned and publicly funded system." (Globe and Mail 1/18/00).

British NHS Heading for Ruin. As a result of more than 20 years of underfunding, more than half of intensive care and X- ray machines need replacement; many are at risk of catastrophic breakdown. Surveys show that Britons prefer private to NHS hospitals 99 to 1. A visiting British journalist thought that DC General was better than any public hospital in Britain, as it was bright and clean with a competent, motivated staff supported by new technologies. British physicians and nurses complain of being drowned in a sea of paperwork that stifles initiative and innovation (Grace-Marie Arnett).

 

School-Based Fraud

According to the Government Accounting Office (GAO), some school districts took in only $7.50 of each $100 they were supposed to get for Medicaid school-based health programs. Consultants such as Deloitte and Touche may receive up to 25% of the Medicaid take under contract with a school district. HCFA's oversight is "weak." GAO investigators found that "some school districts...under the guidance of outside firms [committed] willful and intentional violations of the law." In Michigan, for example, $28 million in improper payments were made during a period in which Deloitte and Touche was providing billing services. (BNA's HCFR 4/19/00).

 

Reports on Medical Savings Accounts

MSAs Thrive in South Africa. One-half of private policyholders in South Africa, which allows much more freedom than the U.S. in program design, have chosen an MSA. The health of MSA holders is no better than that of the general population. While the average MSA holder spends about half as much on outpatient services as those with traditional plans, there is no evidence that they skimp on primary care in ways that lead to higher hospital costs later on (NCPA, 6/20/00).

MSAs Good for Poor, Sick. Economists at the RAND Corporation used a behavioral simulation model to predict the choices made by people in a small-group environment. They concluded that MSAs would be chosen by persons who had higher risk and less income than those choosing HMOs. [Is that called adverse selection?] (See Goldman et al. HSR: Health Services Research 2000 (April) 35:1 Part I, 53-74.)

MSAs Attractive to Employers, Employees. A survey of "health-care leaders" in PricewaterhouseCoopers HealthCast 2010 report shows that 60% expect that "most employers will offer MSAs as an option" by 2010.

A Zogby poll conducted July 14-17 showed that 86% of 890 likely voters want the option to purchase an MSA (of Republicans, 88%; Democrats, 84%; whites, 81%; hispanics, 90%; and blacks, 87%).

Selling Points. "It's hard to convince people used to shopping around in an HMO/PPO world that higher deductibles and copays are good," writes John Hood, President, John Locke Foundation. "I say don't bother right now. Just free up rules on MSAs and Flex Accounts and let people get used to them. They'll figure out on their own...that raising deductibles and restricting insurance to catastrophic events is in their interest."

Two companies-Medical Savings Insurance Co. and Golden Rule- offer a hospital indemnity rider for a one-time fee. This is like decreasing term insurance for the first 16 months of coverage, which pays the difference between the deductible and the amount that should be in the MSA if maximum contributions had been made.

 

Conflicts of Interest on Vaccines

The Majority Staff Report of the House Committee on Government Reform chaired by Rep. Dan Burton issued a scathing report on vaccine policymaking. The August 21 report can be downloaded from www.house.gov/reform.

"Conflict of interest rules employed by the FDA and the CDC have been weak, [and] enforcement has been lax."

A detailed account is given of the rotavirus vaccine approval. As of the time of the report, the Fact Sheet on the CDC web site had not been updated and asserts that no association has been made with bowel obstructions.

Liaison representatives do not have to disclose conflicts. Committee staff uncovered numerous significant financial ties between vaccine manufactures and the AAFP, AAP, AMA, ACOG and other organizations with liaisons to ACIP.

 

AAPS Calendar

Oct. 25-28, 2000. 57th annual meeting, St. Louis.
Oct. 24-27, 2001. 58th annual meeting, Cincinnati.


AAPS Files Amicus in Napster Case

In the Napster case, more is at stake than the ability of 22 million users to share music. The question is whether a web site providing a peer-to-peer information distribution network can be shut down by government if some may be using it for an unlawful purpose such as copyright infringement.

In a case brought by the Recording Industry Association of America, a very broad preliminary injunction by Judge Marilyn Hall Patel is under appeal in the Ninth Circuit.

Article I, section 8, clause 8 of the U.S. Constitution states that Congress shall have the power to "promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." Copyright law protects an important intellectual property right. It has, however, key exceptions for fair use, without which scholarship and research would be seriously impeded. Additionally, courts have established that ideas cannot be copyrighted, and that misuse can invalidate a copyright (as in Practice Management Information vs. AMA, concerning the AMA's abuse of its CPT coding monopoly- also a Ninth Circuit decision, which is likely to be revisited if Napster loses). Copyright of information needed to comply with the law is also being contested in Veeck v. SBCCI (see AAPS NewsMay 2000).

RIAA fears that its profits-and its control over the distribution of music-are threatened by the internet. In fact, all entities that depend upon central control, secrecy, and suppression of dissent or competition are imperiled.

The intention of the Founding Fathers to promote arts and sciences could be turned on its head by applying misdirected copyright laws to the internet. Freedom of speech and association could also be destroyed by the unprecedented governmental intrusions required to enforce such laws.

In a brief arguing that Judge Patel erred in applying standards for copyright infringement, the Digital Media Association stated that: "A new policing obligation on media management software developers would be impossible to manage, impose extraordinary burdens and liability on DiMA members, and is classic legislation by the judiciary." Moreover, "if copyright laws serve to deter the development of breakthrough technologies with tremendous possible benefits to society and consumers, merely because some are using that technology improperly, we will never realize the full benefit of the amazing developments occurring throughout...the world."

In support of Napster, AAPS and the Eagle Forum Education and Legal Defense Fund argue that the injunction was overbroad in that it quashes many indisputably lawful associations through Napster. A Napster precedent could jeopardize any web site that brings individuals together, or points them elsewhere, and might thereby facilitate an unlawful activity. Moreover, plaintiffs misused the copyrights they seek to enforce by engaging in price- fixing schemes.

The directory service utilized by Napster is not radically different from technology used very widely on the internet, with the potential for dramatic benefits to the entire economy by reducing transaction and distribution costs. Such innovation will also promote the creation and consumption of music, probably bringing an overall increase in revenues to composers and musicians though possibly harming the middlemen.

"Congress has weighed the benefits to the public of an unregulated internet against the costs that technological change imposes on existing interests, and Congress has consistently chosen to keep the internet unregulated in all relevant respects- and this Court should do likewise," states AAPS.

In particular, Congress has refused to pass the "Collections of Information Antipiracy Act" (H.R. 354), which would allow the assertion of an ownership interest in database listings against alleged "pirates" such as Napster. The bill is supported by numerous established interests, including realtors and the AMA (trying to reverse the Practice Management decision). (See www.databasedata.org/hr354/hr354.html for links to relevant documents and testimony, and AAPS News May 1999).

Most importantly, the First Amendment applies even if a special interest is harmed thereby. AAPS is especially concerned about potential censorship of medical information. For example, the government could cite the Napster injunction as precedent to shut down any web site that facilitates discussions of drugs not approved by the FDA. Or criticism of an approved treatment, such as Ritalin for ADHD, might be silenced. "Ritalin" is a registered trademark, and some of the official information is copyrighted. The owner might try to assert intellectual property rights by demanding that web sites only provide authorized links.

The threat of costly litigation over copyright infringement is already being used to chill criticism (as of the Church of Scientology, see www.xenu.net) or to prevent public access to CPT codes to facilitate price comparisons for medical treatments (see Wall St J 8/25/00, p. A1).

"Court-ordered strangleholds such as the Napster injunction create multimillion dollar monopolies for special interests," stated AAPS Public Relations Counsel Kathryn Serkes. "This injunction should be reversed."

The AAPS press release and brief are posted at AAPS Online. The amicus brief was funded by the American Health Legal Foundation.

 

Delicensure for Speaking Out?

The Federation of State Medical Boards held an invitational event in Washington, DC, September 6-7 to discuss national licensure standards. Although proposed model legislation (see www.fsmb.org) is already largely incorporated into the Medical Practice Act of the several States, a number of provisions bear careful watching:

Disruptive Behavior. This could be very broadly defined. What is an "aberrant behavior pattern" that creates a hostile environment or "could threaten the delivery of quality health care"? Could it meant objecting to a Clinical Pathway?

New Ethics. Unprofessional conduct could include anything that could bring "the medical profession into disrepute," including "violation of any provision of a national code of ethics acknowledged by the Board."

Standard of Proof. "The Board should be authorized to use preponderance of the evidence" [51%] as the standard.

Electronic Communications. If a communication that crosses state lines is found to constitute the practice of medicine without an appropriate license issued by the Board, the physician "should be deemed guilty of a felonious offense."

Punishments. The range of disciplinary actions extends beyond deprivations of the privilege of licensure and includes free public service, medical or nonmedical; fines; monetary redress; and assessment of disciplinary costs.

All members should be vigilant about proposed amendments to the Medical Practice Act by their state legislatures, and keep AAPS informed.


Members' Page

"Quality" Measures. Our JCAHO surveying physician told us that next time the Joint Commission comes to our hospital it will expect to see more Clinical Pathways and more outcomes-based statistics. With the Orix initiative, JCAHO will do more "benchmarking"-comparing hospitals with each other and with national statistics-and be more aggressive in looking at "indicators," such as the number of C-sections.

I always travel well-armed with AAPS materials in my black bag, and at the medical staff meeting I showed the JCAHO physician the pamphlet on Total Quality Management by Gerry Smedinghoff. He actually stood there and read the whole pamphlet. He said he agreed with it and that it was "stupid" (his word) to pick arbitrary numbers for C-sections. Nevertheless, since compliance with "cookie-cutter" and "one-size-fits-all" medicine (his words) was measurable, JCAHO would be demanding more of it for accreditation.

It's one of those Emperor's New Clothes situations: Everyone (even the surveyors) seems to know that there's nothing of substance here, and yet dutifully nods his head in agreement with the "quality work" that is being done.
Lawrence R. Huntoon, M.D., Ph.D., Jamestown, NY

 

Information Overload. Economics explains the antiquated state of information management in hospitals: they are required to process an enormous amount of useless data (Social Security numbers, patients' place and length of employment, DRGs, CPT codes, ICD-9 codes, Medicare regulations, and so on ad nauseum) in an enormous number of incompatible ways for an enormous number of useless purposes. This excess data is called "noise" and is pure waste. Compare this with the amount of data you need to exchange with a vendor to buy a computer, rent a car, or fly cross country. All this is good for consultants who charge by the pound for their reports, which result in making it more difficult for the average employee to get to the doctor he needs and wants to see.
Gerry Smedinghoff, Wheaton, IL

 

Boat Race. An American and a Japanese auto company had a competitive boat race on the Detroit River. The Japanese won by a mile. American corporate management set up a Continuous Measurable Improvement Team of executives to recommend appropriate action. They found that the Japanese team had 8 people rowing and 1 person steering, whereas the American team had 1 person rowing and 8 people steering. After some billions of dollars, the consultants concluded that that "too many people were steering and not enough rowing." Management structure was changed to 4 Steering Managers, 3 Area Steering Managers, and 1 Staff Steering Manager, and a system of incentives was set up to empower and enrich the rower for becoming a six sigma performer. The next year the Japanese won by two miles. The American corporation laid off the rower for poor performance, sold the paddle, cancelled capital investments, halted development of a new canoe, gave awards to the consulting firm, and distributed the savings as bonuses to the senior executives.
Apocryphal, sent by Charles Heller, Tucson, AZ

 

Forms. We took our nine-year-old son to the Emergency Room for a fractured elbow, the result of a spill off a skateboard. The forms we had to sign included the Medicare Secondary Payer Screening, Advance Directives for Health Care Decisions, and (the crme of bureauspeak) "Patient Rights." My favorite is Right #11: "The patient has the right to have access to a public telephone." Isn't that in the Miranda warning? The patient also "has the right to exercise other civil rights and religious beliefs." But when I tried to exercise Right #5, "medical records will be released to the patient with written consent," by taking my son's x-ray to the orthopedic surgeon, the apparatchik behind the counter demanded the name of the surgeon. I told her it was none of her business what I did with the x-rays I had paid for; she was welcome to keep a copy for the hospital. Besides the spirit of distrust created by this red tape, the most disconcerting aspect is that most Americans do not think there is anything peculiar about this way of doing business. Thus, my focus is now on reforming education.
Craig Cantoni, Scottsdale, AZ

 

A Public Health Crisis. The epidemic of AMA-sanctioned pseudoscience is the Death Star of public health crises. Pseudoscience (outcome studies, "quality" measures, politics, alchemy, insurance economics, eugenics, etc.) is counterfeit science with all the power of the real thing. Historically, pseudoscience inflicts a heavy toll on societies that foolishly invest in its mystical and mischievous claims. Pseudoscience kills. Because physicians are no longer taught to distinguish it from true science, the substance of the profession is being lost. Dumbing down the physician leads to confusion and loss of resolve: a deadly, soon-to-be-irreversible trend.

True science informed by freedom of speech, the Oath of Hippocrates, intact property rights-and individual physicians free from third-party coercion-are necessary to have the best medical care in the world instead of the most corrupt system.
Robert L. Kimber, M.D., Atlanta, GA

 

Fairness. If an IRS audit reveals that you overpaid your taxes, you get a rebate. With HCFA, undercharges are disregarded while you have to refund the gross total of all overpayments.
Paul B. Jones, M.D., Grand Junction, CO


Legislative Alert

Presidential Prescriptions

The debate on the future of Medicare has intensified by several notches. Governor George Bush of Texas has unveiled his long-awaited Medicare reform proposal, including prescription drug coverage. Dogged by Al Gore and press critics for not offering details, Bush dumped a Washington wonk's wastebasket full of them on a mentally overloaded media corps. It is one of the most detailed Presidential campaign proposals ever, far more so than the famous Clinton health care proposal of 1992, which was not finalized in its 1,342-page legislative form until October 22, 1993, after the Clinton Health Care Task Force spent months in secret sessions trying to calibrate the right federal subsidies for syringes in the vaccinations for left-handed Lithuanian people of color enrolled in the boldly envisioned regional alliances to be set up in South Louisiana.

OK, already, so candidate Bush falls short of the Clintonian passion for detail that sank the Clinton health plan. But it is indeed far more than we would have expected, and probably far more than is good for Bush. Does the Bush plan cover weight management? Does the sliding scale slide enough? Is the progressive scale progressive enough? Did he get the subsidy right for this individual here? Does his plan cover that family over there? What about the special health needs of X, and the special problems of Y? If the subsidy covers a couple who makes $19,750, what impact does it have on the widowed mother of 7 children whose income is $19,999? Former Senator Bill Bradley, who, before Bush's Medicare reform issuance, outlined perhaps the most detailed health care proposal of any other Presidential candidate, can advise the Texas Governor on the wisdom and the danger of sharing the details of health-care proposals with anybody.

Bush cannot be accused of ducking the kind of precise formulations that politicians normally avoid like the plague. As for the Vice President, the Gore Plan is little more than a variation of the Clinton proposal, which, curiously, is now going just about nowhere very fast on Capitol Hill, even among the Democrats in Congress. There is a reason: an abiding, and largely undiscussed concern about the, yes, details of the Clinton plan, how it would affect delivery of drugs and what kind of regulatory requirements and litigation it would surely invite. Curiously, Congressional Democrats are busy crafting or developing alternative proposals.

Two observations, before we touch upon the proverbial nitty gritties that millions beyond the Beltway allegedly have been awaiting breathlessly. First, the Bush proposal draws heavily from the policy work done by the National Bipartisan Commission on the Future of Medicare chaired by Senator John Breaux (D-LA) and Rep. Bill Thomas (R-CA)-more than 18 months of hearings, meetings, testimony, special sessions and working groups. There were presentations by CBO, GAO, the Lewin Group, the Progressive Policy Institute, the Mayo Foundation-you name it. It is a huge and impressive body of data and details. Recall that the basic model of the reform was the Federal Employees Health Benefits program (FEHBP), which covers Members of Congress, Congressional staff, the White House, and millions of federal employees and retirees. Not a perfect system, but a huge improvement over today's Medicare program in virtually every respect. Second, Bush has decided to make the bureaucratic inefficiencies of Medicare, the waste and inflexibility, an issue. He has spoken about the inflexibility of administrative pricing, how it undermines access to medical technology, and how the enforcement of Medicare rules has gone so far as to throw dying patients out of hospice. For analysts who have thought that the debate should be about the way Medicare actually works, rather than simply how much it costs, the Bush proposal is a refreshing change.

Bush's Nitty Gritties

The Bush plan would increase Medicare spending by about $158 billion over a ten-year period. Of that amount, he would earmark $110 billion for Medicare modernization-structural change and the establishment of a new system of private plans for retirees-and roughly $48 billion for state assistance plans to provide quick subsidies for low-income elderly who need prescription drugs. Bush also said he would appoint a bipartisan commission to oversee the implementation of this proposal. Here are the main features:

  • Every senior will remain entitled to current Medicare benefits. This, in effect, is was a proposal that accompanied the Bipartisan Commission majority recommendations.

  • Retirees would have access to a broad choice of health plans, including prescription drug packages. Again the basic model for this system is the FEHBP.

  • Retirees would get coverage for catastrophic costs at $6000 for all medical expenses. The catastrophic limit, in other words, is not confined merely to prescription drug costs. The lack of catastrophic coverage is the major reason why Medicare is such a poor product as an insurance package; it is not real insurance, as the term is commonly understood. The requirement of such coverage is similar to that which is normally found in FEHBP plans.

  • Low-income retirees would be fully funded for the costs of the average premium. In the Bush proposal, the full costs of Medicare premiums for all seniors at 135% of poverty (incomes at or below $11,300 for individuals or $15,200 for couples) would be covered. According to Bush spokesmen, this would affect an estimated 6 million seniors nationwide. Under the Bipartisan Commission proposal, low-income seniors would also be fully subsidized.

  • Sliding scale subsidies for the drug costs of near poor families. The Bush plan would subsidize the cost of drugs on a sliding scale between 135% and 175% of poverty (between $14,600 and $19,700 for couples). Bush spokesmen say that this would affect an estimated 5 million people.

  • Drug discounts for all retirees. The Bush plan calls for a 25% discount of premium costs for all seniors at or above 175% of poverty, a provision broadly similar to that found in the Breaux- Frist Senate proposal. The Bipartisan Commission did not include such a discount.

  • Immediate assistance to state elderly programs to help low-income seniors get access to prescription drugs. Former HCFA Administrator Gail Wilensky, currently advising the Bush campaign, is saying that this approach is the fastest way to get help to low-income seniors. Bush envisions this program being quickly enacted before his major Medicare reform fully kicks in. The $48 billion would be used to cover all costs of prescription drugs for those at or below 135% of poverty, and part of the cost for those who have incomes between 135 and 175% of poverty, and catastrophic costs over $6000. No such proposal for fast tracking assistance was included in the recommendations of the Bipartisan Commission.

  • Establishes a unified Medicare trust fund, combining Parts A and B. This provision is also similar to that of the Bipartisan Commission.

  • Retains the age of eligibility at 65. A proposal to raise the eligibility age to 67, tracking changes in the Social Security system, failed during the Balanced Budget Act debates in 1997. So, the age of eligibility will be fixed in accordance with Social Security's old standard, which was set in 1935, when the average life expectancy was 62. Bush has clearly decided that a change is either a bad idea on its merits, or that this fight is simply not worth it. It should be noted that this is a break with the majority recommendations of the Bipartisan Commission, which would have raised the age of eligibility to 67.

Avoiding Detailed Confusion

Clinton and Gore share a common proposal with some minor differences. Senators John Breaux (D-LA) and Bill Frist (R-TN) have a proposal. The House Republicans have already passed their proposal in the House. And the Congressional Democratic leadership has a proposal. The details are confusing, and the similarity of provisions across party lines is surprising. What the Administration, the Bush proposals, and leading Congressional proposals have in common is hardly shocking: they are all promising universal access to prescription drug coverage; they are all providing a sliding scale of subsidies to Medicare patients; they all fully cover the premiums and drug costs of low-income Medicare patients married and single, with ranges of subsidy for people at or below $11,000 for individuals to roughly $19,000 for couples; and, not surprisingly, they all call for additional Medicare spending. Over ten years, Gore wants to spend an additional $250 billion; Bush, $158 billion; and the Medicare Commission, $61 billion. Official cost projections, however, are likely be wrong. The Clinton drug proposal started out at $118 billion over 10 years, and in six months, it jumped 35% to $160 billion.

Notice how the Medicare debate has changed. You'd hardly recognize it. It is no longer about dollars and cents, or even trust funds. All of the Medicare debates in 1995, 1996, 1997 -how to stop excessive spending-seem to have been either forgotten or put on hold. Part of the reason is the looming federal budget surplus, and the general desire to use it, if and when it materializes in real money, to offset Medicare costs. This, of course, can be a tricky business. A "risky scheme" even. Most of the money is not in the treasury, or under Alan Greenspan's pillow; it is just supposed to be coming. It's out there, somewhere. Like the Truth in the X Files.

Those who depend on tomorrow's surpluses are like folks betting the farm on tomorrow's winnings at the race track. The projections look great, but they can change. A downturn in the stock market, a slowing of the economy, a sour quarter, an unforseen change in federal spending, and we could all be swimming once again in red ink. But politicians are feeling good, sippin' on those surplus projections, just like a bunch of good old boys around the still, and with all that money coming in even that baggy old bureaucracy could get all gussied up in fancy new benefits. So, forget all that stern fiscal conservatism of the past, the worries about Medicare spending zooming out of control. It feels good to think positive. And part of the reason is that the reimbursement reductions in the notorious Balanced Budget Act have frightened Congress away from spending reductions, particularly with the closure of home health agencies, the screaming from hospital administrators, and the threatened bankruptcy of nursing homes. Cuts are now "bad"; more spending is now "good."

The debate seems to be revolving around benefit additions, but more importantly, Medicare's structure. And that is where they all differ-big time. Consider, for example, the design and delivery of the drug benefit. For Clinton-Gore, the benefit is added as new part of the old program. It is not insurance at all. Moreover, it is to be administered by a private contractor, a legalized, geographically based monopoly-the worst of all possible worlds for a consumer-just like the Medicare carriers administer other Medicare benefits today. For the Bipartisan Commission, the drug benefit is integrated as a necessary component of a real private health insurance package, within the framework of a new competitive health insurance market. Likewise, for Bush, the drug benefit would be part of comprehensive reform. Consider also the financing of the drug benefit. For Clinton- Gore, a second Medicare premium for seniors is added. There is no deductible. Taxpayers assume all of the risks. For the Bipartisan Commission, drug premiums are integrated into insurance premiums- a single premium that would include catastrophic coverage. Deductibles would vary with plans. As with the FEHBP, competing health insurers, not taxpayers, assume the risks. For Bush also, the drug premium would be integrated into the overall premium.

The Real Issue: Control

The needs of the senior population are diverse, and the access problem is not universal; two-thirds of seniors have drug coverage, according to the Kaiser Family Foundation. For those with insurance, drug costs account for 1% of their income; for those without insurance, it is about 2%. Gail Wilensky notes that the average annual drug costs for seniors run between $300 and $350 per year. A small proportion of seniors with high costs need help. But the real issue is not money, nor the level of subsidies, nor whether candidate Bush can out-promise candidate Gore. The real issue is control. And here there is a profound difference. Under a system based on patient choice and market competition, you can have a broad range of drug and insurance coverage, and you can choose the coverage that you think is best for you. You are in control. If the federal bureaucracy controls the financing and delivery of the drug benefit, the bureaucracy will control what drugs you get, how you get them, when you get them, and under what circumstances you will get them. If Medicare, as it is constituted today, covers a benefit, you can only get the benefit under the terms and conditions set by Congress or the Medicare bureaucracy. If you don't like those terms and conditions, that's tough. Go complain to your Congressman. That's the real issue before the country.

Robert Moffit is a prominent Washington health policy analyst and Director of Domestic Policy at the Heritage Foundation.