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National NOW Times >> Winter 2003/2004 >> Article

Harmful Medicare Prescription Drug Bill Passes

by Jan Erickson, Government Relations Director

Senior women, low-income and disabled persons were dealt a hard blow when Congress passed and George W. Bush signed into law the so-called Medicare, Prescription Drug, Modernization and Improvement Act (H.R. 1) on Dec. 8, 2003. This was a victory for right-wing Republicans who are determined to unravel the safety net that progressives struggled to build over the last 70 years.

The new law, funded at $400 billion, will line the pockets of pharmaceutical companies and health care providers, while providing spotty coverage for seniors' prescription drug costs. It will reduce coverage for up to six million low income and disabled persons and possibly result in the loss of private employer-provided health insurance for as many as three million retirees.

No More Medigap, No More Negotiation

Seniors leaving traditional Medicare in order to get the prescription drug benefit will receive government vouchers to help them pay private insurance companies for managed care coverage, but they will also lose the guarantee of care under Medicare and assume most of the risk of paying for their care. Few limitations are set on these private plans: premiums, deductibles and extent of coverage can vary and companies can maintain different lists of drugs they will and will not cover. Seniors will not be allowed to buy any additional insurance coverage, like the current Medigap plans, to fill in the holes, and there will no longer be government-negotiated prices (negotiation of bulk prices is actually prohibited by the bill, as is reimportation of lower-cost prescription drugs from Canada).

Medicaid beneficiaries (very low income seniors and people with disabilities) who also qualify for Medicare will lose their "wrap around" coverage that pays for nearly all health care costs and will be subjected to a restrictive assets test (not more than $6,000 in assets) before they can qualify for less costly prescription drug assistance.

Limited Benefits, Increasing Premiums

Because the $400 billion appropriation will pay for only 20 percent of projected prescription drug costs over the 10 year period, the benefit is limited. For the first $2,000 worth of coverage, a senior will pay over $1,100; while for the first $5,000 of coverage, a senior will pay about $4,000. At the same time, it is predicted that seniors in managed care plans will face rising monthly premiums, increased deductible amounts, higher co-payments and sky-rocketing prescription drug costs.

Exercising the might of the majority, Republicans railroaded H.R. 1 through Congress just prior to adjournment, excluding all but two token Democrats in the final negotiations and releasing the 1,100 page conference agreement just before members were scheduled to vote. The House vote was 220-215 (mainly along party lines), while the Senate voted 54-44, with 11 Democrats joining Republicans to support the bill. Most Democrats opposed offering a drug benefit outside of traditional Medicare and were vehemently opposed to repealing government authority to negotiate lower drug prices.

Secret Bill Has Ominous Implications

Why the majority kept the final bill so secret became clear—it is, in effect, a vehicle to reward major insurance and pharmaceutical interests that give heavily to Republicans and are working to elect Bush in November. More ominously, H.R. 1's prescription drug benefit turns out to be a carrot to draw seniors out of the traditional Medicare program into private, for-profit managed care plans, while leaving the remaining under-funded government Medicare program to be overwhelmed with sicker and poorer seniors.

NOW, dozens of other organizations and thousands of angry seniors protested at a Capitol Hill event and around the country on the day the bill was signed. Adding to their fury was the controversial role that AARP played in supporting the regressive legislation—a role that many, including NOW, saw as a betrayal of seniors' welfare. More information on the Medicare prescription drug plan can be found on the following web sites:
www.familiesUSA.org
www.medicarerights.org
www.retiredamericans.org

Bribes and Political Pay-Offs

Some $12 billion of taxpayer dollars will be handed over to insurers to entice them to cover seniors—in essence, bribing those companies that in the past have dumped seniors because they can't make enough profit by insuring older persons. The prohibition on the government's ability to negotiate lower drug prices is an incredible windfall worth $139 billion in profits to drug companies. Physicians, hospitals and other providers in rural areas will be similarly enticed with a generous $25 billion to provide services in smaller communities. Various health-related businesses will receive $86 billion in direct payments and new tax breaks under the new law. Some of these groups had a heavy hand in writing provisions of this legislation that would directly benefit them.

The drug industry has made a reported $650 million in contributions to members of Congress in recent years—the vast majority of which went to Republican candidates. More than three dozen of Bush's big time fundraisers are affiliated with companies that will benefit from the new plan. Many incumbent Republican members have received donations totaling in the six figures from pharmaceutical interests.

AARP's Conflict of Interest

As it turns out, AARP, the 35 million member senior organization, played a key behind-the-scenes role in engineering the legislation, helped by none other than former House Speaker Newt Gingrich. (Readers will recall that, at one time, Newt said that all entitlement programs should shrink away to nothing.) Bill Novelli, AARP's Executive Director, actually wrote an introduction to Gingrich's book on health care!

When details were released about AARP's $635.8 million annual operating revenues and hefty income from insurance royalties, drug discount cards and advertising fees, it became clear that the organization has a serious conflict of interest in that it stands to make tens, perhaps hundreds of millions under the new law.

To convince seniors that the new law is beneficial, AARP has been using its enormous revenues to run newspaper advertisements and undertake a major media campaign to convince seniors the group didn't sell them out. Reportedly, more than 15,000 members resigned after the information about AARP's involvement became known. Several Democrats have filed bills to reverse or modify parts of the Medicare prescription drug law, focusing primarily on reinstating the government's ability to negotiate lower prices for prescription drugs.

Next on the right-wingers' target list: dismantling Social Security by converting it to private investment accounts—a major pay-off to the financial services industry that would shift enormous risk to individuals who would have to rely on the vagaries of the stock market to build retirement savings.

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