No Cause for Celebration

John Podesta
John Podesta

Today, at the White House bill signing of the Medicare legislation, backs will be slapped, corks will be popped and the hands of smiling politicians will be firmly shaken. But despite the rhetoric, the president is not signing a law that strengthens Medicare or improves drug coverage for all seniors. Instead, he is signing away the opportunity of a lifetime to truly improve Medicare through a needed drug benefit and solid reforms. He is signing away billions of dollars to the drug and HMO industries in the name of “reform.” And, he is signing yet another piece of legislation that adds to his legacy of tearing down American institutions that work in favor of ideologically driven, special-interest oriented policy.

What could have been. After more than five years of effort, there was a virtual consensus in Congress for some type of Medicare drug benefit and a bipartisan commitment to expend $400 billion to provide one. It was, without doubt, an unprecedented opportunity for consequential action. Congress could have used the funds to provide a drug benefit that genuinely helped the lowest income and the sickest and fairly allocated the rest to all beneficiaries. It could have used Medicare’s group purchasing power to negotiate fair prices for prescription drugs and take reasonable steps to reduce drug costs for other Americans. And it could it have taken steps to ensure adequate provider payments and contain costs.

What is. Congress and the president have created an inequitable, unbelievably complicated, and inefficient drug benefit that actually makes some beneficiaries worse off. It includes gaps in coverage – which means for days, weeks or months each year, seniors could have insurance payments stop. It prohibits Medicare from negotiating drug prices, breaking up the purchasing power of 41 million beneficiaries in favor of an untried, drug industry-supported delivery system. It causes millions of retirees and low-income people to lose their current coverage, and it does little to reduce drug prices for the rest of the American public= And it institutes numerous policies designed to move people out of Medicare and into HMOs. While some who are uninsured, near poor or spend a certain amount on drugs may benefit, it is incomprehensible that this "benefit" hurts so many and provides so little assistance to others.

Who wins. So, who is celebrating today? HMOs: taxpayers will pay significantly more to HMOs which provide services to Medicare beneficiaries. This funding allows HMOs to offer better drug coverage than what’s available in traditional Medicare. And, ultimately, the plan institutes a defined contribution program in the guise of a premium support demonstration. Drug Industry: lobbyists for the pharmaceutical companies were able to knock out policies that would have reduced prices. Instead, drug companies will have the federal government subsidizing their inflated prices and spiraling advertising budgets. With all of these giveaways, it isn't surprising that, since the details of the Medicare bill began to emerge on November 12, a Schwab health care sector mutual fund has seen its value rise more than 7 percent – outpacing the S&P 500 by more than 6 percent over the same period. AARP: which is a health care insurer as a well as a seniors’ organization. Its more than $200 million in revenues for marketing private insurance policies and drug discount cards will only rise with the passage of this bill.

Who loses. The short list includes millions more than will be celebrating the Medicare bill signing. Seniors and people with disabilities: who lose retiree health, Medigap or Medicaid coverage; whose drugs are rationed by private insurers; who are forced into HMOs, leaving their doctor behind. Taxpayers: who will finance the profits of HMOs and the drug industry. The Next Generation: who will have to pay to fix this as well as Medicare’s long-term financing that this law has worsened.

What should be done. Congress cannot wait to fix these problems. The first order of business should be to repeal the prohibition against Medicare negotiating price discounts. If private insurers cannot achieve the type of prices discounts that seniors deserve, then Medicare should give it to them.

This is just one of the many needed changes. Congress should make the drug benefit meaningful and ensure that the law does no harm to seniors – particularly retirees and low-income beneficiaries. Congress should also stop the privatization of Medicare, which inequitably shifts costs and risks to seniors. In short, for $400 billion Congress should have been able to do a whole lot better – because they certainly couldn't have done much worse.

John Podesta is the president and CEO of the Center for American Progress.