Drugs for Vouchers


The Republicans seem to
think they can stay on the wrong side of the health policy debate for years
and not pay a price at the polls. Since they took control of Congress in 1995,
they have opposed prescription drug coverage for all seniors as well as
patient protection legislation, and they have promoted the privatization of
Medicare. Now, George W. has thrown his weight behind a policy that ties
Republican cooperation on drug coverage with Democratic cooperation on

On July 12,
when Bush announced his goofy plan to encourage seniors to join drug-buying
clubs, he also said that he would not support extending Medicare coverage to
prescription drugs unless this change was linked to the privatization of
Medicare. The next day, Thomas A. Scully, Bush’s new director of Medicare, was
asked if Bush would support Medicare coverage for drugs without privatization.
“I think that the answer is clearly no,” Scully replied. “It’s a very, very,
very strongly held view of the administration that there is not going to be a
prescription drug benefit without reform [of Medicare].”

statement that he is willing to hold Medicare drug coverage hostage to his
privatization scheme resembles a suicide threat more than a negotiating
position. The Democrats would be fools to give an inch. Bush is in essence
saying he is prepared to be the Grinch who blocked prescription drug coverage
for seniors or the Grinch who forced seniors into HMOs, and the Democrats had
better cooperate or they’ll be sorry.

It is difficult
to understand why Bush and the Republicans would adopt such a risky position.
Public support for Medicare drug coverage is high and rising, public hostility
toward HMOs is high and rising, and seniors are very happy with the
traditional Medicare program (in which 86 percent of beneficiaries are
enrolled and which does not restrict choice of doctor or engage in other
“managed care” tactics). Moreover, HMOs have already demonstrated their
inability to reduce costs for employers and for Medicare (the other 14 percent
of Medicare beneficiaries are currently enrolled in HMOs). In fact, a dozen
scientific studies indicate HMOs are so inefficient compared to the
traditional Medicare program that HMOs actually increase Medicare’s costs each
time they lure a senior away from the traditional Medicare program.

Under these
circumstances, why on earth would any sane politician endorse pushing seniors
into HMOs, much less insist that Democrats do the same or face resistance to
their efforts to give seniors drug coverage? Enormous contributions from the
health insurance industry are, of course, a factor. Ever since the Republicans
began opposing patient protection legislation in 1996, the health insurance
industry has drowned the Republicans in money. But ignorance or, if you like,
a touching faith in HMO agitprop, may be the most significant factor.

The Republican
campaign to privatize Medicare began in 1995, near the tail end of the 1992-96
lull in premium inflation and before the consumer backlash against HMOs became
constant front-page news. Because the inflation lull occurred just as the HMO
industry was taking over the U.S. health care system, gullible politicians and
pundits attributed the lull to the spread of HMOs. By 1996, the consumer
backlash was in full swing, and by 1997 premium inflation soared again,
disabusing most employers and pundits, but not Republicans, of the notion that
HMOs can cut health care costs.

In 1995,
Republicans were looking for some way to cut Medicare’s costs by $270 billion
over seven years to make room for tax cuts for the rich. Ever eager to accept
the claim that the private sector is a better problem-solver than the
government, they bought the HMO industry’s claim that HMOs could cut the
annual growth in Medicare expenditures if the traditional Medicare program was
forced to compete with HMOs. Traditional Medicare would lose “market share” to
the HMOs, Republicans reasoned, just as the traditional insurers in the
private sector had.

We know that
Republicans had endorsed competition between Medicare and HMOs by no later
than October 1995 because in that month Newt Gingrich was caught on tape
telling a group of Blue Cross Blue Shield executives that Republicans had a
plan that would cause Medicare to “wither on the vine.” But Republicans did
not put their privatization proposal in writing until 1999. That year, the
eight Republican members of the National Bipartisan Commission on the Future
of Medicare, a now-defunct commission established by Congress in 1997,
endorsed a Medicare privatization plan euphemistically called “premium

“Voucher plan”
would be a more accurate title. The Republican scheme calls for replacing
Medicare’s traditional guarantee of all medically necessary doctor and
hospital services with a voucher that seniors would have to use to buy
insurance from either a private-sector company or traditional Medicare. The
voucher scheme failed to get enough support to be endorsed by the commission,
but two commission members, Sen. John Breaux (D-LA) and Sen. Bill Frist
(R-TN), introduced legislation late in 1999 embodying the voucher proposal.
Bush endorsed the Breaux-Frist voucher proposal in September 2000 and has done
so on several occasions since. It is the Breaux-Frist voucher plan that Bush
is now saying Democrats must support before he will support adding drug
coverage to Medicare.

Because the
media has paid little attention to the details of the Breaux-Frist bill and
because Bush has been allowed by the press to speak in abstractions and
euphemisms about his plan, Bush has yet to encounter the critical coverage he
will surely provoke as soon as he has to explain the details of his plan. Like
the Republicans on the Bipartisan Commission, Bush vaguely describes his plan
as one which gives seniors “choice.” Seniors can stay with the traditional
Medicare program or enroll in an HMO, whatever suits them, Bush says cheerily,
time and again. “You can choose to keep your current Medicare benefit, exactly
the way it is, or …you can add to it and you can improve it,” he said when
he endorsed Breaux-Frist on September 5, 2000. “It’s your choice.” “No change,
no threats, no problems,” he said last July 13, explaining how utterly
uncoercive his proposal would be to seniors who like traditional Medicare and
wouldn’t want to be pushed out.

But the
Bush-Breuax-Frist proposal is based on financial coercion and will not work
without it. The proposal cannot possibly save Medicare money unless a
substantial portion of the 34 million seniors who are currently in traditional
Medicare are induced to leave it and enroll in HMOs. But why would seniors
want to do that, especially after Medicare coverage is extended to
prescription drugs? The six million seniors who are currently enrolled in
Medicare HMOs do so to get the extra coverage HMOs offer, notably, drug
coverage. What will prevent the seniors now enrolled in HMOs from rushing back
to traditional Medicare after Medicare covers drugs?

Financial pressure. The vouchers in the Bush proposal would be set at a value
high enough to cover an HMO’s annual premium, but too low to cover the higher
annual premium that traditional Medicare would be forced to charge because
traditional Medicare does not ration as the HMOs do and because traditional
Medicare enrolls sicker people. Thus, all but upper-income seniors would be
under pressure to leave the traditional Medicare program.

A recent report
released by the Henry J. Kaiser Family Foundation about the attitudes of the
elderly toward Medicare reveals just how dangerous Bush’s privatization scheme
is to the GOP. The report, which was based on what seniors said in focus
groups, concluded that “seniors are very satisfied with the Medicare system”
and that “words that suggest a…significant departure from the current
Medicare structure, such as ‘changed’ or ‘privatized,’ are very negatively
perceived.” Moreover, the focus group participants were enthusiastic about
extending Medicare coverage to drugs. And, said the report, in view of the
large budget surplus, “participants do not blink at the idea of allocating
significant government resources” to pay for Medicare drug coverage.

Imagine how
upset seniors, and, in all probability, the non-elderly, are going to feel
when they learn that Bush wants to hold drug coverage hostage to a plan that
uses vouchers to push seniors into HMOs? If Republicans insist on holding
hearings on their drugs-for-vouchers plan, and if the Democrats and their
allies are half as aggressive in poking holes in it as they have been in
poking holes in Bush’s social-security privatization plan, Republicans will
pay for their stupidity in the 2002 elections.              Z

Kip Sullivan
is on the steering committee of the Health Care Campaign of Minnesota, and
writes frequently about health policy.