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home / ftcr / commentary

Dec 09, 2003

Who will profit from Medicare reform?

by Jamie Court & Frank Smith
 
The following commentary was published in the San Diego Union-Tribune on December 09, 2003:

Court is author of "Corporateering: How Corporate Power Steals Your Personal Freedom And What You Can Do About It" (Tarcher/Putnam). Smith is senior fellow at the Santa Clara-based Civil Society Institute.
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President Bush's signing of Medicare "reform" legislation yesterday threatens to usher in a new era in health care where the only rule is "the seller knows best."

The $400 billion taxpayer program has a dubious benefit for seniors. Privately run drug policies would cost about $400 per year, carry a $250 deductible and require seniors to pay as much as $3,500 in out-of-pocket costs. The benefit is only expected to cover one-fourth of anticipated drug costs.

By contrast, the boon for the medical-insurance complex is unquestionable.

Pharmaceutical companies can charge whatever they like for drugs because the government is prohibited from buying drugs through bulk purchases. Bulk purchasing is the reason prescription drugs are sold at one-third of their price in Canada and are available at a huge discount to the U.S. Department of Veteran Affairs.

The HMOs and insurers will receive $14 billion in taxpayer subsidies to encourage the companies to sell private for-profit policies. Seniors will be driven into HMOs notorious for their penny-wise, pound-foolish ways. Between 2001 and 2003, for example, the nation's six largest HMOs increased their earnings and profitability while dramatically decreasing spending on medical care -- taking 20 cents of every premium dollar for their overhead and profit while traditional Medicare spends less than two cents on overhead.

Hospitals get $26.6 billion, which is good news for HCA. This is the hospital chain run by the family of Senate Majority Leader Bill Frist. Frist holds stock in and will receive his inheritance from HCA, which is also the subject of the most massive fraud settlement in U.S. medical history.

What the legislation means for Americans is a move away from a 25-year-old government entitlement to health care for seniors to a system where patients will be given a stipend toward paying whatever health care sellers want to charge.

The same sea change is already sweeping the workplace through so-called "defined contribution" and "consumer-directed" health care plans. These allow employers to pay a set amount toward workers' costs and leave the patients to pay the rest without any controls, public or private, on how much the providers can charge.

Medical savings accounts, approved in increasing number through the new Medicare reform, are part of the same scheme. Put away what you need for the rainy day, buy a less valuable insurance policy with only catastrophic coverage, and come up with the rest yourself. It's every patient for himself or herself. This notion dilutes how much money there is in the insurance pool to take care of the sick at any given time.

The promise of insurance -- that you pay when you're well and collect when you're sick -- is unraveling in America quicker than any other social compact. For Medicare, this means pharmaceutical companies can keep driving up the prices of their drugs, and the benefit will simply keep shrinking. Seniors will just have to shell out more.

The new law was greased by campaign contributions from the big medical industries. Pharmaceutical manufacturers contributed an average of $28,504 to the 204 Republicans who supported the bill, but just $8,112 each to the 25 Republicans who opposed it. HMOs gave the few Democrats who supported the bill an average of $11,654.

The bill is a Trojan horse to usher in an era of privatized, unregulated health care. It represents a philosophical shift away from consideration of health care as vital necessity of life toward a "free market" where sellers of vital resources always have the upper hand.

AARP justifies its position in support of the program by stating the drug benefit is voluntary, if imperfect. What the group does not say is that without cost controls the benefit will bankrupt the Medicare program much earlier, leading to the ultimate conclusion that seniors will just have to pay more themselves. After all, there's no entitlement any more. The HMOs will ration health care and make a subsidized profit.

To be fair, AARP is acting in its own interest, if not that of its members. AARP currently sells Medigap insurance policies -- covering what Medicare won't. This insurance business was worth $3.7 billion last year. United Health Group signed a 10-year contract with AARP in 1998 to provide health coverage to its 35 million members. AARP will likely not only sell the new drug benefit policies, but also charge quite a pretty penny for its membership list.

Some Democrats have already discussed introducing moderating legislation, but it's not likely to hold the day, unless it helps the medical-insurance complex make more money. The clear signal from Capitol Hill is that benefiting sellers, not seniors, is what Medicare reform is all about.


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