Medicare Part D: Medicare Part D:

Free to Choose or No Free to Choose or No Choice At All ???Choice At All ???

Most Governmental Spending is Most Governmental Spending is Accounted for by 2 Great Social Accounted for by 2 Great Social

Insurance PlansInsurance Plans

Medicaid targets the poor and Medicaid targets the poor and covered 37.5 million people in 2004covered 37.5 million people in 2004

Medicare covers citizens over the Medicare covers citizens over the age of 65 and in 2004 covered 39.7 age of 65 and in 2004 covered 39.7 million peoplemillion people

In Both Systems Health Insurance In Both Systems Health Insurance is Socialized:is Socialized:

But the medical care is provided by But the medical care is provided by the private sectorthe private sector

Medicaid is a state-federal matching Medicaid is a state-federal matching program with states providing 40% of program with states providing 40% of fundsfunds

Medicaid is financially unstable and Medicaid is financially unstable and subject to the whims of elected subject to the whims of elected officialsofficials

Medicare is a purely federal program Medicare is a purely federal program with a strong political constituencywith a strong political constituency

Medicare is a Single-payer Medicare is a Single-payer SystemSystem

Medicare has lower administrative costs Medicare has lower administrative costs because it does not spend large sums because it does not spend large sums fighting adverse selectionfighting adverse selection

Medicare does not screen applicants or Medicare does not screen applicants or differentiate coverage among individualsdifferentiate coverage among individuals

Medicare spends less than 2% of its Medicare spends less than 2% of its resources on administrationresources on administration

Private insurers spend more than 13% on Private insurers spend more than 13% on administration administration

Many Seniors Face Problems Many Seniors Face Problems Paying for Prescription DrugsPaying for Prescription Drugs

Congress passed the Medicare Congress passed the Medicare Modernization Act in 2003Modernization Act in 2003

The bill ensures that private The bill ensures that private insurance companies provide the insurance companies provide the benefit instead of the Medicare benefit instead of the Medicare administrationadministration

This design increases the cost of This design increases the cost of drugs as well as the administrative drugs as well as the administrative costs costs

Major Problems with the Medicare Major Problems with the Medicare Drug BenefitDrug Benefit

It prohibits direct negotiation between It prohibits direct negotiation between Medicare and the pharmaceutical industryMedicare and the pharmaceutical industry

The relative advantages and The relative advantages and disadvantages of various plans are disadvantages of various plans are difficult to recognize difficult to recognize

Insurers can change their benefits after a Insurers can change their benefits after a plan has been selected and a drug may be plan has been selected and a drug may be dropped from the “covered list” dropped from the “covered list”

The drug program is too complicatedThe drug program is too complicated

The Pharmaceutical IndustryThe Pharmaceutical Industry

Prices for drugs are typically more Prices for drugs are typically more than 2000 percent above their cost than 2000 percent above their cost of productionof production

Evidence shows that there has been Evidence shows that there has been a multi-billion dollar windfall to drug a multi-billion dollar windfall to drug manufacturers as a result of the manufacturers as a result of the transfer of drug coverage from transfer of drug coverage from Medicaid to Part D plans Medicaid to Part D plans

Pharmaceutical Industry ContinuedPharmaceutical Industry Continued

Main goal of the pharmaceutical Main goal of the pharmaceutical lobby is to ensure there is no lobby is to ensure there is no governmental interference with their governmental interference with their ability to charge high pricesability to charge high prices

The pharmaceutical industry is a The pharmaceutical industry is a tight, global oligopoly with tight, global oligopoly with significant pricing power in the significant pricing power in the United StatesUnited States

The Marketing of DrugsThe Marketing of Drugs

More money is spent marketing More money is spent marketing products to doctors than in products to doctors than in developing the drugs sold by the developing the drugs sold by the drug companies drug companies

From 1996 to 2001 the From 1996 to 2001 the pharmaceutical sales force in pharmaceutical sales force in America doubled =90,000 repsAmerica doubled =90,000 reps

Drug reps give gifts to doctors for Drug reps give gifts to doctors for writing scripts- doctors also market writing scripts- doctors also market drugs to other doctorsdrugs to other doctors

More Medicines From Abroad More Medicines From Abroad SeizedSeized

Canadian pharmacies purchase brand-Canadian pharmacies purchase brand-name drugs at low wholesale prices name drugs at low wholesale prices negotiated with the purchasing power of negotiated with the purchasing power of the Canadian governmentthe Canadian government

Federal regulators have cracked down on Federal regulators have cracked down on drugs ordered from abroad, especially drugs ordered from abroad, especially those from Canadathose from Canada

The seizures appear to have coincided The seizures appear to have coincided with the launch of Medicare’s drug-with the launch of Medicare’s drug-discount programdiscount program

What Do We Know So Far?What Do We Know So Far?

Kaiser Family Foundation reported in Kaiser Family Foundation reported in 2004 that 25% of eligible seniors could 2004 that 25% of eligible seniors could pay less buying drugs on their own than pay less buying drugs on their own than through the new Medicare programthrough the new Medicare program

Government is well-suited to pool risk and Government is well-suited to pool risk and provide insurance (see Social Security provide insurance (see Social Security and Medicare)and Medicare)

Writing private insurers into the drug Writing private insurers into the drug program equation adds expense and program equation adds expense and complexitycomplexity

The Unraveling of Employer-The Unraveling of Employer-based Health Insurancebased Health Insurance

The rise in Medicaid coverage The rise in Medicaid coverage results from the growing number results from the growing number of people who have lost their of people who have lost their employer-provided health employer-provided health insurance insurance

Without Medicaid, the uninsured Without Medicaid, the uninsured population would have increased population would have increased even more than it haseven more than it has

State and federal governments State and federal governments are increasingly paying the tab are increasingly paying the tab for health care that used to be for health care that used to be provided by employersprovided by employers

The Plan: After the $250 The Plan: After the $250 Deductible a Retiree Finds Deductible a Retiree Finds

The insurer covers 75% of the next The insurer covers 75% of the next $2000 in drug costs$2000 in drug costs

Then assistance vanishes through Then assistance vanishes through the “doughnut hole”the “doughnut hole”

Total expenditures must exceed Total expenditures must exceed $5,100 and then insurers cover 95% $5,100 and then insurers cover 95% of additional drug costsof additional drug costs

The Paradox of ChoiceThe Paradox of Choice

Given too many options the rational Given too many options the rational person is more likely to be paralyzed person is more likely to be paralyzed than to pick wiselythan to pick wisely

Beneficiaries tend to focus on Beneficiaries tend to focus on premiums or out-of-pocket costs: not premiums or out-of-pocket costs: not the array of factors that actually the array of factors that actually determine which plan is bestdetermine which plan is best

Beneficiaries who haven’t signed up Beneficiaries who haven’t signed up by May face enrollment penaltiesby May face enrollment penalties

Is This a Ploy to Get Everyone into Is This a Ploy to Get Everyone into Medicare HMO’s?Medicare HMO’s?

Seniors may feel that compared to Seniors may feel that compared to the labyrinth of premiums and cost-the labyrinth of premiums and cost-sharing, arrangements of stand alone sharing, arrangements of stand alone PDP’s, Medicare HMOs are easierPDP’s, Medicare HMOs are easier

Without the requisite sign ups, PDP’s Without the requisite sign ups, PDP’s will lose bargaining leverage with will lose bargaining leverage with drug manufacturers and plans will drug manufacturers and plans will collapsecollapse

Medicare not Social Security is on Medicare not Social Security is on an Unsustainable Pathan Unsustainable Path

Health costs are growing so much Health costs are growing so much faster than the rest of the economyfaster than the rest of the economy

The Bush administration is pushing The Bush administration is pushing to make tax cuts permanent thus to make tax cuts permanent thus forcing cuts in Medicare based on the forcing cuts in Medicare based on the growing gap between revenues and growing gap between revenues and outlaysoutlays

We can ration care, reign in spending We can ration care, reign in spending or raise revenuesor raise revenues

The Bush Administration The Bush Administration Encourages the Encourages the

Wrong Kind of Insurance Policies Wrong Kind of Insurance Policies Insurance companies pay only for things Insurance companies pay only for things

like $30,000 amputation fees for patients like $30,000 amputation fees for patients with diabetes- but not the $150 visit to the with diabetes- but not the $150 visit to the podiatrist podiatrist

Payments are made to respond to Payments are made to respond to symptoms, when they should be symptoms, when they should be encouraged to promote healthencouraged to promote health

It’s not a question of whether medicine It’s not a question of whether medicine has become a business, as what kind of has become a business, as what kind of business it has become??business it has become??

Free Market Ideologies are Free Market Ideologies are Inappropriate for Health CareInappropriate for Health Care

Higher spending on those with good Higher spending on those with good insurance occurs by consigning more insurance occurs by consigning more people to poor insurance or none at allpeople to poor insurance or none at all

Most health costs are incurred by a Most health costs are incurred by a small proportion of the population small proportion of the population whose expenses greatly exceed limits whose expenses greatly exceed limits on out-of-pocket costson out-of-pocket costs

US system relies on private rather US system relies on private rather than public health insurance which than public health insurance which raises costsraises costs

What about a National Health Care What about a National Health Care System??System??

Health care should be a fundamental Health care should be a fundamental right and a public rather than a private right and a public rather than a private goodgood

The US is unique in not sponsoring The US is unique in not sponsoring government-controlled Universal government-controlled Universal Health InsuranceHealth Insurance

There are appalling inefficiencies in There are appalling inefficiencies in our system with approximately 30% of our system with approximately 30% of American health care spending wastedAmerican health care spending wasted

Selected Sources

New York Times, Health Care Confidential by Paul Krugman. January 27, 2006

New York Times, Pharmacists Say Drug Plan Threatens Their Livelihood by Robert Pear, March 13, 2006

Washington Times. Junk Medicaid by Alex Gerber. January 29, 2006. New York Review of Books, The Health Care Crisis and What to Do About It by

Paul Krugman, Robin Wells. Volume 53, Number 5 · March 23, 2006 . New York Times, For Some Who Solve Puzzle, New Medicare Drug Plan

Pays Off by Robert Pear, March 26, 2006 Center for Medicare Advocacy, Prescription Drugs Cost More Under

Medicare Part D Than Under Medicaid, February 16, 2006. The Century Foundation. Launching the Medicare Drug Benefit: The Good,

the Bad, and the Ugly. October 28, 2005 The Century Foundation. Medicare Part D: Watch Those Numbers. January

26, 2006. New York Times, More Medicines from Abroad Seized by Lisa Girion.

February 11, 2006. The Atlantic, The Drug Pushers by Carl Elliot. April 2006.