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How the 2003 Medicare Prescription Drug Benefit Became Law

This article being drafted.

July 12, 2001: President Bush lays out plans for Medicare prescription drug benefit.

June 20, 2003: Medicare actuary Richard Foster is warned not to disclose to Congress his estimate of the proposal's true cost. "The consequences for insubordination are extremely severe," Foster is told.

Richard S. Foster

From SourceWatch

Richard S. Foster, the "government's longtime chief analyst of Medicare costs said" March 12, 2004, "that Bush administration officials threatened to fire him last year if he disclosed to Congress that he believed the prescription drug legislation favored by the White House would prove far more expensive than lawmakers had been told."

Foster, "a nonpartisan Department of Health and Human Services official who has been Medicare's chief actuary for nine years, said he nearly resigned in protest because he thought the top Medicare administrator, and perhaps White House officials, were acting against the public interest by withholding information about how much changes to the program would cost."

"Text of June 26, 2003, email from Richard S. Foster, chief actuary, Centers for Medicare and Medicaid Services [published by Knight Ridder Newspapers]:

"This whole episode which has now gone on for three weeks has been pretty nightmarish. I'm perhaps no longer in grave danger of being fired, but there remains a strong likelihood that I will have to resign in protest of the withholding of important technical information from key policy makers for political reasons. Stay tuned."

June 27, 2003: Senate and House approve different versions of the drug bill. Rep. Billy Tauzin, R-La., one of the legislation's principal authors, describes it as "a shot of legislative botox [that] will rejuvenate an antiquated program by eliminating the age-old lines of a different era."

July 15, 2003: Conference committee of 5 Democrats and 12 Republicans begins work to reconcile the two versions of the bill.

November 13, 2003: President Bush calls on Congress to "finish the job."

November17, 2003: AARP endorses bill, launches $7 million ad campaign.

November 21, 2003: Bush calls wavering Republicans from Air Force One.

November 22, 2003:
3:01 a.m. House begins voting on unified bill; roll call to last 15 minutes.
3:30 a.m. With bill losing 212-to-214, Speaker Dennis Hastert keeps voting open.
4:15 a.m. Bush calls several lawmakers, pleading for votes.
4:20 a.m. Hastert and HHS Secretary Tommy Thompson, who have been scurrying around House floor rounding up votes, corral Rep. Nick Smith, R-Mich.; he'll later say (and then recant claim) that they offered donations and endorsements for his son's congressional campaign in return for a vote.
5:53 a.m. After longest roll call in House history, bill is approved 220-to-215.

December 16, 2003: Thomas Scully resigns as administrator of the Centers for Medicare & Medicaid Services, joins Alston & Bird, where he will lobby for drug companies.

March 5, 2004: Patrick Morrisey, who as chief health counsel of the House energy and commerce committee was a principal staff author of the bill, takes job as lobbyist for drug makers. In all, 15 members of Congress, staffers, and officials who worked on the drug bill will go to work for industry.

September 30, 2004: Following an investigation of Rep. Smith's bribery allegations, House ethics committee admonishes three representatives, including Majority Leader Tom DeLay and Rep. Smith himself, for "making public statements that risked impugning the reputation of the House."

December 15, 2004: Rep. Tauzin named president of drug lobby group PhRMA; annual pay reported at $2 million.

How to Overcome Four Key Obstacles to a Medicare Drug Benefit

WASHINGTON (By Joseph Antos, AEI) (September 2003)

Legislation could create a sensible drug benefit and put us on the path toward prudent reform, but achieving those aims will require the conference committee to rethink parts of the proposals.

The inaugural issue of this bimonthly publication discusses key concerns blocking a legislative agreement to establish a prescription drug benefit plan under Medicare, the main federal health program for senior citizens. Those concerns involve the proposed benefit’s extent and structure, the likely private sector response to it, its effect on the rest of the Medicare program and the healthcare coverage its beneficiaries have traditionally received, and the degree of freedom private providers would have if they elected to participate in the program.

The battle in Congress over Medicare reform is beginning to resemble a siege. Debate is raging over each provision in the nearly 2,000 pages of dense legislative prose now before the conference committee. Legislation that voluminous offers numerous opportunities to trade off one provision against another, which is the stuff of political compromise.

Perhaps not this time, however. The core issues are deeply divisive, causing some to fear that the chances of agreement are rapidly diminishing. Democrats maintain that the prescription drug benefit is just not good enough, while Republicans raise the specter of program meltdown if we spend too much. Republicans see the promise of lower cost and better performance through competing health plans, while Democrats fear that competition will jeopardize the traditional Medicare program and harm millions of beneficiaries.

Both sides have valid concerns, but the rhetoric has soared beyond reality. The bills before the conference committee reflect sharp disagreements between the House and the Senate, and within the political parties, on several key points. A compromise is possible, however, if policymakers can admit that the most extreme assertions are overblown, and that some of the most hard-fought provisions might not actually work.

In that spirit, let’s take a close look at four problems that have threatened to derail the Medicare legislation. The shorthand description of each problem below is meant to capture the most pessimistic view of the issue. The ensuing discussion makes clear that all is not lost. Either the dire consequences might not be so dire, or the consequences might be avoided by changing the legislation.

Those problems cannot be resolved easily. The traditional political expedient of pouring more money into the new program would not work even if additional funds were available in the budget. Legislation could create a sensible drug benefit and put us on the path toward prudent reform, but achieving those aims will require the conference committee to rethink major parts of the proposals.

Problem 1: The prescription drug benefit is not good enough.

Perhaps the most reviled feature of the Medicare drug proposals is the “doughnut hole,” a gap in coverage that affects beneficiaries with high prescription drug costs. The lower side of the doughnut would reimburse for a portion of drug spending after the first $250 or $275. The initial coverage would cease after the individual’s spending had reached several thousand dollars. At that point, beneficiaries would be required to pay the full costs of their drugs until they had made out-of-pocket payments of $3,500 (in the House bill) or $3,700 (in the Senate bill). Insurance coverage would then resume for those with even higher expenses.

This benefit structure is confusing, unfair, and designed to fail. Imagine trying to explain to your mother that the prescription that cost her $20 last month now costs $100, but might cost her nothing later in the year. Or trying to explain to someone with an annual income of $15,000 that he is protected from high drug spending as long as he spends more than $3,000 from his own pocket.

Despite appearances to the contrary, the Republicans who came up with this scheme have not lost their grip on reality. They have a budget problem, and they are using a budget trick to solve it. Policymakers found that they could not design a simple drug benefit and give enough of a subsidy to 40 million people for them to sign up for it without spending more than $400 billion over the next decade. In previous years, Democrats would have solved the budget scoring problem by making the benefit sunset after eight years--an obvious sham, since Congress would surely not let a popular benefit expire.

Republicans have adopted the doughnut hole, knowing full well that a future Congress will fill in the gap. Sen. Ted Kennedy (D-Mass.) bluntly admitted that intention in his support for the Senate bill. The budget process promotes this kind of chicanery by ignoring the cost of future legislation to fix a serious flaw in the new program, even when that legislation is virtually inevitable.

Congress should level with us, and themselves, about the real problem: they have promised more than the government can deliver. Traditional first-dollar coverage for prescription drugs with a low premium and no benefit gap would be popular with seniors, but the cost to taxpayers would be enormous. It would not come as much of a surprise to most Americans that the cost of the big new entitlement would come directly out of their pockets. Straight talk on the real costs of the Medicare benefit would be a sobering but welcome change.

The doughnut hole can be filled without doubling federal outlays, but only by redirecting program subsidies to encourage more cost-conscious prescribing and purchasing. The most direct approach would be to reduce first-dollar coverage but add coverage for higher levels of spending. That would mean making seniors pay a substantially larger deductible than under the House and Senate bills in exchange for filling in the coverage gap. Beneficiaries could be given an additional cash subsidy provided through a Medicare drug discount card to help them pay the higher deductible. Under this approach, seniors would be sensitive to cost since they would use their own money (from their accounts) to pay the full cost of drugs until they met the deductible. In contrast, seniors in a traditional insurance program would directly pay only a portion of the cost, and would lose the value of the benefit if they did not use it.

Private drug plans are likely to find other ways to fill the doughnut hole that could be attractive to many beneficiaries. Given sufficient flexibility to experiment, plans might be able to eliminate the benefit gap by using aggressive cost-management techniques to keep premiums affordable. For example, a plan might guarantee payment for the lowest-price prescription drug appropriate for the patient’s illness. If the patient wished to buy a more expensive drug, he would pay the entire difference between the plan’s reimbursement and the price of the alternative product. That difference could be hundreds of dollars in some instances, providing an extremely strong incentive to use the drug whose payment was guaranteed. Unlike reference pricing approaches, this “reference reimbursement” model would not dictate what drug manufacturers may charge for their products. Drug plans would continue to seek low prices for their customers, but in many cases generic drugs would offer the lowest price. Reference reimbursement or similar methods potentially could eliminate the doughnut hole and keep out-of-pocket costs down, but only for beneficiaries whose prescription drug needs were met by generics and low-price brands.

Unconventional approaches to the Medicare drug benefit might not appeal to everyone, but such ideas should be given a chance in the market and seniors should be free to choose. The Senate bill precludes this sort of experimentation by imposing too many restrictions on the structure of benefits. The House bill is less restrictive, but the Medicare administrator should be given broader discretion to allow more innovative approaches. Restrictions on benefit design and other regulations in the Medicare legislation are intended to protect beneficiaries, but they may in practice prevent the development of cost-effective plans that could meet the needs of many seniors.

Problem 2: Drug plans will not compete, particularly in rural areas.

Congress can enact a drug benefit, but will private plans deliver it? Critics point out that private managed care plans have abandoned the Medicare+Choice program in droves over the past five years, and those plans that remain are huddled along the Atlantic and Pacific coasts. That leaves most of the country without a private health plan option today. The Senate bill attempts to avoid a similar problem under the drug benefit through a “federal fallback,” an unnecessary and misguided bit of policy.

Both the House and Senate bills would make a prescription drug benefit available to all beneficiaries through private health plans. Health maintenance organizations (HMOs) and preferred provider organizations (PPOs) would offer the full set of Medicare benefits, including prescription drugs. New private plans would offer drug-only coverage to beneficiaries in the traditional Medicare program. The “stand-alone” drug plans would bid to operate in regional service areas. Those plans would be at risk if the cost of providing prescription drugs to their enrollees exceeded the amount that they bid.

The bills assure that drug-only private plans will participate by shifting financial risk from the plans to the taxpayer. If enough risk is shifted away from the plans, they would be able to operate much like pharmacy benefits managers (PBMs) that run the drug benefit for most private insurance plans. They would be paid for the drugs dispensed and would profit by managing the cost of the benefit in addition to receiving a fee for handling millions of transactions. Under both bills, the Medicare administrator could reduce risk to negligible amounts if necessary to encourage plan participation.

The real novelty of the Medicare drug proposals is the requirement that private drug plans operate with financial risk, perhaps following a transition period. That would provide a powerful incentive for the plans to manage program cost. But putting plans at full financial risk in the first year of the program is a problem.

Private drug plans would have great difficulty setting their bids for the first year, when they would have no experience to help them predict the cost of the drug benefit or the patterns of prescription drug use among Medicare beneficiaries. Full-risk bids for 2006, the first year of operation, would be inflated to protect each plan from those great uncertainties. If, alternatively, the program administrator exercised the authority to reduce the initial risk, plans could safely lower their bids.

After the first year or two of operation, however, private drug plans would have detailed spending and use data as well as familiarity with administrative requirements of the program that would affect their cost. Plans would then be able to make more realistic and competitive bids, resulting in lower cost to both taxpayers and beneficiaries. Benefit structures could be refined, and more plan options would be likely to develop as plans learned more about beneficiary demands.

The Senate would short-circuit that development with the federal fallback. If there were not enough drug plans in a region, Medicare would contract with a PBM or some other company to administer the drug benefit on a fee-for-service basis, similar to the way physician services are administered today.

The federal fallback is unnecessary because the fallback plan is simply a private drug plan with (almost) no financial risk--something the program administrator could permit under both bills without invoking the fallback provision. But that provision would not be harmless. The fallback provision would require a federal formulary and price list that would chill the atmosphere for innovation in the pharmaceutical industry.

Unlike an at-risk private plan, the fallback plan would have little incentive to design an efficient, cost-containing benefit. The plan would not stand to profit by reducing program cost, with the exception of a possible bonus payment. Because a fee-for-service benefit cannot be administered without knowing what can be purchased and what price to pay, the federal government would have to approve a formulary and price list for all prescription drugs used by Medicare beneficiaries. Although the fallback plan might operate in only a few regions, the formulary and price list would be de facto national standards.

It is a short step from there to federal price controls and restrictions on patient access to new pharmaceuticals that would affect all seniors, not just those enrolled in a fallback plan. The budget savings from top-down regulation are immediate and seductive. But the consequences of such an approach are long-term and serious, discouraging the research and development that could lead to more effective and potentially cost-saving drug therapies.

Congress should focus its attention on assuring a smooth transition to a competitive Medicare drug benefit. Although the Medicare administrator will have the authority to adjust financial risk, the final bill should not impose unnecessary restrictions on private drug plans that could discourage them from participating in the program.

Reasonable legislative and administrative controls and appropriate payments based on actual operating costs are necessary to avoid a repeat of the Medicare+Choice experience. Unlike comprehensive health plans, drug-only plans should be able to penetrate rural markets without major difficulty since they would not need to organize complex networks of providers. Internet-based systems and mail order prescriptions could supplement the retail pharmacy distribution system, which might be limited. Although the problem of rural access has been one of the major driving forces behind the drug legislation, it can be readily solved.

Problem 3: Premium support will jeopardize traditional Medicare and harm millions of beneficiaries.

Medicare spending is projected to double over the next decade, and it will grow even faster after that. Adding a $400 billion prescription drug benefit will add momentum to runaway growth in the program. The House bill attempts to apply the brakes by limiting the federal subsidy given to Medicare beneficiaries. Critics charge that this would drive premiums up in traditional Medicare, jeopardizing the healthcare of millions. Yet those same critics argue that traditional Medicare is more effective in controlling costs than the private sector. One of those statements could be true, not both.

Under the premium support provision, beneficiaries who chose a more costly health plan would pay higher premiums than those enrolling in lower cost plans. The provision would require traditional Medicare to compete on a more equal footing with private plans. That matters, since more than 85 percent of Medicare beneficiaries are enrolled in the traditional program.
The House provision would become effective starting in 2010 in local markets with high levels of Medicare enrollment in private health plans. The federal subsidy for all beneficiaries in a competitive local market would be the cost of providing services to beneficiaries averaged across all health plans (including traditional Medicare) in that area. Plans with costs above that average would increase their premiums by the full difference between the subsidy and the bid. Plans with costs below that average would decrease their premiums by three-quarters of the difference (with the remaining savings retained by the government).

Critics of the House provision fear that healthy beneficiaries would leave traditional Medicare in response to lower premiums in private plans. Those remaining in traditional Medicare would therefore tend to be sicker, and the average cost of care in that program would rise. Premiums would continue to increase sharply in subsequent years as the selection of healthier people into private plans continued, making the traditional program unaffordable.

That outcome is neither inevitable nor even likely. Beneficiaries consider numerous factors in addition to lower premiums in deciding whether to change plans, and many people are willing to pay much higher premiums if they perceive that the plan offers higher value. Once in a health plan, however, most people stay enrolled, blunting the potential instability that could ensue otherwise.

The experience of the Federal Employees Health Benefits Program (FEHBP) is instructive. That program has ample opportunity for risk selection. Federal workers and retirees can choose from twelve different national plans, and they may also have a number of other health plans operating in their local markets. There are often large premium differences among those plans. Yet the system is remarkably stable, with only moderate numbers of beneficiaries switching plans each year.

The premium support provision in the House bill includes safeguards to prevent the adverse consequences of risk selection. Premium adjustments would be phased in over five years, limiting any premium increase in traditional Medicare during the transition to the new system. The subsidy calculation would be heavily weighted in favor of the traditional program (which will continue to be the dominant plan option for the foreseeable future), further reducing the potential size of any premium increase. Federal payments to the plans would be adjusted for risk, which means larger subsidies for plans enrolling sicker patients. Moreover, those payments would rise every year to reflect the actual cost of providing care to Medicare patients. That would avoid the problems Medicare has experienced with payments now pegged to some artificial inflation rate, which can result in underfunding and a loss of access to healthcare services.

If traditional Medicare is a more expensive plan that attracts sicker patients, those safeguards would substantially moderate premium increases. But if traditional Medicare is more effective in controlling health costs, as some claim, then beneficiaries in that program could see their premiums decline under the premium support provision.

The premium support provision in the House bill would be introduced in a carefully measured way, but it could still lead to risk-selection problems. Any such problems that did arise would develop over a period of years, allowing more than enough time for the Medicare administrator or Congress to take action to protect beneficiaries. That might be small comfort to the supporters of the status quo, however. After all, Congress has taken fourteen years (and counting) to develop an acceptable prescription drug benefit since its last foray into this issue, despite clear and growing demands from beneficiaries.

Taken on its own terms, the premium support provision is a step in the right direction. A new approach is needed if we hope to control Medicare costs over the long term. The traditional Medicare program is an uncapped entitlement to payment for healthcare providers. Payment incentives foster ever-expanding spending growth for services that, at the margin, are not worth what they cost. Premium support would change those incentives by placing traditional Medicare and private plans on a more even footing, one that would penalize waste and inefficiency. But the House provision is embedded in a highly regulatory structure that will limit the plan choices beneficiaries can have. Congress can do better.

Problem 4: Competition will not work under the weight of over-regulation and micromanagement.

Critics argue that the failure of the Medicare+Choice program proves that competition among health plans cannot work in Medicare. In one important sense, the critics are correct. If Congress imposes too many restrictions on how plans may operate and compounds that handicap with unrealistic payments that do not keep pace with the cost of care, the health plans will drop out. A poorly designed system that does not give competition a chance will ultimately fail.

One of the most troublesome restrictions in the proposals limits the number of PPOs that may operate in each geographic region. Under both bills, the three lowest “credible” bids are given government contracts, and other “credible” bidders are excluded. A “credible” bid presumably means that the benefits, cost sharing, and customer service that the plan proposes seem reasonable to the government bureaucrat in charge of this process. Eliminating plans that bid high assures a larger market share for winning plans. Such a guarantee is necessary to overcome the reluctance of health plans to venture into this new Medicare program, which would require PPOs to expand into less profitable rural markets. But that would also eliminate some plan choices that might be attractive to a significant number of beneficiaries.

Rather than empowering bureaucrats, Congress should empower consumers. Both bills require beneficiaries to pay the full additional cost of a more expensive health plan through higher premiums. Seniors have a well-deserved reputation for scrutinizing their healthcare costs. We can count on them to seek the best value, which for many (but not all) will be the lowest cost plans.

Eliminating the three-low-bidder requirement begins to unravel the complicated web of provisions in the proposals, and other changes would be necessary. The legislation should eliminate provisions that create unnecessary impediments to health plan participation in Medicare.

Solid private health plans, including employer health plans, would be more likely to enter a competitive Medicare program if they could do so without having to fundamentally change the way they operate. Such plans could be permitted to define their own benefits, cost-sharing requirements, provider networks, and geographic market areas, as long as they meet basic solvency and consumer protection requirements. It should not be necessary to herd people into special Medicare-only plans just because they have had their sixty-fifth birthday.

Many of the restrictions in the current proposals are intended to give rural beneficiaries a choice of private health plans. This is a perverse kind of cross-subsidy: Congress would create limited plan options in rural areas by hobbling competition in more populous markets where most of Medicare’s money is spent. By requiring PPOs to operate in large, multistate regions and limiting the number of successful bidders, the federal government would overpay PPOs in their established urban markets. The extra money would compensate the plans for the high fees demanded by rural providers and other costs of expanding into new markets.

In essence, the current proposals subsidize urban health plans in the hope that seniors in rural areas would benefit. It would be far more efficient and effective to subsidize rural beneficiaries directly rather than imposing complicated mandates on private health plans that would reduce competition and consumer choice for the majority of seniors.

Congress has a second chance to design a competitive Medicare program that will work, but it must build into the current proposals more flexibility for health plans and beneficiaries alike. Restrictions on the number and types of plans that may compete in Medicare, and on the way those plans design and manage the benefit, should be relaxed. The government should work hard to overcome its well-deserved reputation as a bad business partner by reducing administrative burden and opening lines of communication. And the government should shed the conceit that it can control a complex and inherently unpredictable health system by the application of more and better laws and regulations.

An Unprecedented Opportunity

The focus on private health plans, complicated bidding arrangements, and the myriad of technical adjustments in the proposals sometimes obscures what Medicare reform is really about. The two main objectives of reform should be to make Medicare a better program for America’s seniors and a more affordable program for everyone. Congress has an unprecedented opportunity to promote better health outcomes, reduce unnecessary spending, and give consumers more control--and more personal responsibility--over their healthcare. Congress can start us down that road this year, but only if the Medicare legislation that emerges from conference avoids the mistakes of the past.

The conference committee could take three actions that would change the terms of debate and break the political impasse. First, conferees must build flexibility into the reform and preserve options (including traditional Medicare) for beneficiaries. Excessive regulation and complexity would stifle innovation and unnecessarily limit health plan choices. A more flexible approach modeled after the FEHBP would more effectively encourage plan participation than the current proposals, and would offer more choice and better consumer protection for seniors.

Second, the committee should take full advantage of clinical research, information technology, and insurance innovation. The reform should build toward an information-intensive future that can improve quality of care and consumer satisfaction, and reduce costs.

Third, conferees need to make Medicare work for the sickest patients. People with multiple chronic illnesses account for the bulk of Medicare spending, but the traditional Medicare program does nothing to coordinate the services they receive. That often means inappropriate care, excessive cost, and worse patient outcomes than could be achieved if Medicare’s resources were managed more intelligently. A prescription drug benefit is the missing piece that will make patient management strategies possible in traditional Medicare if Congress thinks creatively.

None of these ideas resolves the premium support controversy. The conference will seek a compromise, perhaps testing premium support in several market areas in 2007 or 2008 after the drug benefit has been firmly established. That makes sense if the final bill adopts only portions of the FEHBP model, which at this juncture seems likely. Testing would reveal where problems lay and would give all parties a chance to make premium support work under less-than-ideal conditions.

Congress will likely serve up half a loaf of Medicare reform: allowing more competition among private plans immediately, but delaying competition among all the plans (including traditional Medicare) for a decade or more. That will be a success if the legislation creates a framework that can support additional reform in a few years, when the reality of runaway Medicare spending begins to hit home. But such a success will require strong political leadership and major changes in the legislation now in conference

The News Hour on PBS in 2003 Discusses Prescription Drugs in Medicare

Members of Congress started work today on compromise legislation to provide a Medicare prescription drug program. Ray Suarez discusses the differences between the House and Senate versions of the proposal with Robert Reischauer, president of the Urban Institute, and Robert Laszewski, president of Health Policy and Strategy Associates.

KWAME HOLMAN: Some of the most prominent members of Congress from both parties began work this afternoon toward compromise legislation to create a prescription drug program under Medicare.

SEN. BILL FRIST: We absolutely have to do it right. It will have an impact on 40 million seniors with individual disabilities but in truth an impact on at least every American alive today.

KWAME HOLMAN: Members of the House and Senate need to resolve differences between their respective versions of drug benefit bills approved late last month.

REP. CHARLES RANGEL: For so long we have given support for prescription drugs, benefits except rhetorically. Now we come to this historic conference with a vast difference of opinion.

KWAME HOLMAN: But there is much in the two bills that most members can support. Both bills would provide $400 billion over ten years, to fund new prescription drug coverage to 41 million retirees in the Medicare system. Seniors would pay monthly premiums of $35, and annual deductibles-- $250 under the House bill, $275 in the Senate version.

The House bill covers 80 percent of annual drug costs up to $2,000. The Senate: 50 percent of the costs up to $4,500. The House bill provides no coverage for drug costs between $2,000 and $4,900. And there's no coverage in the Senate bill for costs between $4,500 and $5,800. Many congressional Democrats say those gaps in coverage are unacceptable. But coverage would resume for so-called "catastrophic" drug costs.

The House bill would pay 100 percent of prescription drug costs above $4,900. The Senate bill would pay 90 percent of costs above $5,800. Both bills also would allow seniors to buy prescription drugs through new private insurance plans beginning in 2006. The House bill goes further, eventually allowing private health plans to compete directly with all Medicare benefits. Some Democrats claim it's the first step toward the Republicans' goal of destroying the Medicare program. Tennessee Congressman Lincoln Davis:

REP. LINCOLN DAVIS: Under the House-passed bill, Medicare, as we know it, will cease to exist in seven short years, in 2010. Instead of Medicare, seniors will get a voucher for their health care, and told to go shopping, and will be forced to beg insurance companies and HMO's to offer prescription drug coverage for them-- a request that many insurance companies are already on record as saying that they will not be able to fulfill. HMO's will compete against Medicare for younger, healthier seniors, while jacking up the prices for seniors who have chronic conditions and are in need of more care.

KWAME HOLMAN: But Wisconsin Republican Paul Ryan said revamping Medicare will give seniors a choice in health coverage, and that will help control costs.

REP. PAUL RYAN: And by giving seniors more choices, that active choice drives competition, because providers, all of those providers who are regulated and overseen by Medicare, who have to give a comprehensive benefit regulated by Medicare, those providers competing against each other for seniors' business will bring competition to the system, and competition to the system will bring down costs over the long run.

KWAME HOLMAN: House Democrats wanted their Republican colleagues to accept the Senate's bill. It includes a fall-back provision, allowing the government to provide drugs to seniors if not enough private plans do so. New Jersey Democrat Frank Pallone:

REP. FRANK PALLONE, JR.: So when we say that we want a drug benefit and we want to make sure there is a fall-back, so if there is no HMO in the area or no two HMO's in the area, that we guarantee that there is a drug benefit, you know, that if we do not put that in the bill, we will never get the votes in the Senate to pass the bill, and there won't be a drug benefit.

KWAME HOLMAN: House and Senate negotiators met for only an hour today before adjourning. They will resume what are expected to be protracted negotiations next week.

GWEN IFILL: Ray Suarez takes the story from there.

RAY SUAREZ: Two views now on the political fallout so far, and the battle to come. Robert Reischauer is the former head of the Congressional Budget Office, and is now the president of the Urban Institute, a non- partisan think tank. And Robert Laszewksi is president of health policy and strategy associates, a consulting firm that works with insurers. Well, we just saw the House and Senate beginning the work of harmonizing their two versions of the bill, are they that far apart?

ROBERT LASZEWSKI: They are very far apart. Many of the things are close. The prescription drug plan that seniors would get, the stand alone plan they could purchase, they are pretty close on that. There are not any major differences in terms of what they look like. I think most seniors and most Americans think that this is about adding a prescription drug plan to Medicare and that is true. But the most controversial and perhaps the largest part of the bills is where we go with Medicare over the next ten or twenty years. Republicans, in their bill, in the House bill in 2010 would decouple the federal government's guarantee of payments for Medicare. Today the government is guaranteed to pay for 100 percent of a seniors part a benefits and 75 percent of part b Medicare. Under the House Republican bill there would be a complex series of bids that would occur, Medicare and private plans bidding to determine what a benchmark would be. The bottom line is no longer would there be a guarantee of what the government would pay for Medicare. That drives Democrats apoplectic because they are worried. Republicans say we have to move the system to one that is more efficient where there's competition and the private sector or we are not going to be able to afford these benefits. So there's a fundamental difference about where we go with the Medicare program. Is it the larger Medicare single care government run system or is it one based upon competition and not guaranteeing to seniors what they'll get.

RAY SUAREZ: What looks like it will be on the table?

ROBERT REISCHAUER: All of this will be on the table and the question is whether they get around to taking it off the table because there are really deep differences.

RAY SUAREZ: Are there aren't enough commonalities to begin the conversion to say here is what we agree and move on?

ROBERT REISCHAUER: As Bob pointed out, there are elements such as the basic benefit which they could reach an agreement fairly rapidly but the insistence of certain house Republicans for structural reform really sticks in the craw, not just in Democrats but also Republicans in the Senate, some, who come from rural areas, who are afraid that if the traditional Medicare program has to compete in what they regard to be an unfair playing field with private plans, sicker, older, and beneficiaries in more rural areas will be concentrated in service Medicare, have to pay more than they otherwise would have paid and they'll get a raw deal. They are not willing to go along with this. There's more than a Republican Democrat split here. There's a House/Senate split as well.

RAY SUAREZ: That rural coalition that's bipartisan. If you are from a rural state you are likely to find rural friends across the aisle who are friendlier to your way of looking at this?

ROBERT LASZEWSKI: It's bipartisan in the Senate but that's not much the case in the House. In the Senate we have a bipartisan agreement. 40 Republicans voted it for 35 Democrats and one independent. In other words you don't have a Democratic or Republican bill you need both Democrats and Republicans to be on the Senate bill in the long run. In the House you have a much more partisan situation. It is a Republican bill. 19 Republicans voted against it by the way. It is largely a Republican bill. What is fundamentally going on here is there are many Republicans who feel very strongly ideologically about that that you can't add another $400 billion entitlement program to a Medicare plan, especially as the baby boomers retire. That's just plain out of control; we've got to do something about that. And they believe you have to move to the private sector. Just as many Democrats, not all certainly, feel that the way this has got to be taken care of is a government plan that can contain costs. Both sides have really drawn a line in the sand here. The problem is the lines are a mile apart. It's not like one side believes he should spend $350 billion. The other side says $450 (billion) and we split ate $400 (billion). These are deep-seated ideological differences that I don't know how you split.

RAY SUAREZ: Bob Reischauer, after this bill passed in the House and the Senate, the president put his sizable shoulder behind it and it looked like things were steaming along. What happened between then and the day when these conferees began their work?

ROBERT REISCHAUER: Well, people looked at the detail, and the devil is always in the detail when it comes to health legislation. These are very complex bills and the ramifications of various so the of innocent look provisions are suddenly analyzed by all the interest groups and the political actors in Washington and people then begin to draw back. At that point the Democratic senators in the senate sent a letter to the president saying these are our minimum demands. No premium support. No means testing. No tax advantage savings accounts for health which the House had put into the bill and the Senate hadn't considered at all. And then the House shot back with a letter from the Republicans from the president saying here are our lines in the sand. They were -- we have to have a competitive system. Even though this precious little evidence that a competitive system is going to save money it could in theory but in practice we haven't seen that. And we have to have the tax advantage savings accounts and so on and on. As Bob said, these are two lines miles apart right now. But you know we have months to go and we'll probably see pictures of the conferees meeting day after day week after week.

RAY SUAREZ: Does the 2004 election cycle play into this and how so?

ROBERT LASZEWSKI: Absolutely. Both President Bush and then Vice President Gore said we needed a prescription drug plan. They went to states like Florida and said we will pass a drug plan. The president promised that seniors should have a plan. He is going to have to go back to Florida to campaign for re-election. As many as 25 percent of the voters in the next election will be seniors they want a drug plan. As seniors are beginning to look at this somewhere between 60 percent and 70 percent of all seniors have a drug plan today. And a lot of them are taking a look at the benefits being provided here and many of them have drug benefits that are better than what they would get particularly in employer provided plans. There's a concern that if we pass a drug plan many employers could drop the plan. The CBO has estimated a third of employers would drop the drug plan if this passes. The seniors are looking at the details wondering if they are better off nor not. We're seeing the grass root groups getting behind these House Republicans. While one would expect the Republicans would get in line behind the president and pass a plan, there's a lot to indicate that conservative Republican grassroots groups that telling the members to hold that line.

RAY SUAREZ: Well, Rep. Jeff Lake of Arizona said we have abandoned our principles he said to his house colleagues that passed their plan by a whisker. Is he right? Are we going to see a split in the Republican Party when this thing comes to a full vote?

ROBERT REISCHAUER: I think the most likely scenario is that a compromise looking more like the Senate bill than the House bill comes out of the Conference committee that on the House floor it faces a very uncertain future. It loses Republican votes but picks up enough Democratic votes to get through. The leadership is very reluctant but the president holds a gun at their head saying that we're way out on a limb here. We control the Congress. We got you this far, we have to produce something. And then it squeaks through the Senate as well. The other scenario is a bill much like the House bill, which goes to the Senate, can only pick up the Republican votes and maybe one or two Democratic votes and the Republicans dare the Democrats to do a filibuster and have their fingerprints on the knife and hope that when it fails they can blame the Democrats for the failure.

RAY SUAREZ: Earlier in tonight's program we had a discussion of the announcement of this year's deficit and a projection of next year's deficit. Does that reality make this conversation a whole lot harder?

ROBERT LASZEWSKI: Well, it certainly solidifies a position that many of the conservative Republicans are taking that we just can't add another entitlement without thinking this thing through. I agree with Bob, if there's going to be a compromise it will look more like the Senate version. But I'll tell you, in order for the Senate bipartisan version to get through somebody is going to have to cave on their ideological foundation. I think that -- I don't think it's beyond the realm of reason that this doesn't go to the election which may not be the worst thing in the world because again I think most Americans think this is about adding a prescription drug benefit. I think it wouldn't be the worst thing in the world to have a debate about fundamentally where Medicare goes. Right now the Congress is 50/50 and the country has not really weighed in on where they want to go yet.

RAY SUAREZ: Let's look at what the universe looks like after the senate bill passes. Where do private plans stand and where does the government stand where the way our senior citizens got their health care?

ROBERT LASZEWSKI: The Senate plan wouldn't change things that much. Most people would remain in traditional fee for service Medicare and they would buy a privately provided drug benefit that was attached to traditional Medicare. Two plans would be offered at least in each region and they would have their choice. In addition there would be some new options. The most innovative one is a regional PPO, preferred provider organization, which could provide the drug benefit plus a slightly expanded package of benefits -- of Medicare benefits. It would include a stop loss and a catastrophic limit on other spending and a unified deductible, so you wouldn't have the deductible for part A and part B.

RAY SUAREZ: A stock loss that's a point at which the government takes on your expenses.

ROBERT LASZEWSKI: Pays everything and it's a huge need to have one in Medicare. So it would have a little better package than fee for service Medicare. Then you could also join a HMO -- much as you can join one now that would be offered on a county by county basis. Most people think that the structure of Medicare would stay about the same. There would still be roughly 85 percent of the people in the system.

RAY SUAREZ: Quickly Robert Laszewski how would the House version keep more central focus on private companies?

ROBERT LASZEWSKI: The House version has more incentives for private companies to come in with Medicare HMO alternatives. The House version by 2010 puts the traditional program on an equal plain with the private companies. The traditional plan bids for people's business like a private plan would. It is much more favorable to opening the entire environment up to competition.

RAY SUAREZ: Gentlemen, thanks a lot.

With Proposition 101 Defeat, Health-Care Debate will Rage On

PHOENIX (By Jon Garrido, The Jon Garrido News Network) December 2, 2008 — Vote counts affirm Arizona Proposition 101, dubbed the health-care choice initiative, was defeated.

The most recent count shows 50.3 percent voted against the measure backers said would prevent a government-run universal health plan in Arizona.

Opponents said the initiative was poorly worded and would have created problems for the state's medical community.

"It really could have created chaos for the health-care system for many, many years," said John Rivers, chief executive of the Arizona Hospital and Healthcare Association. "Arizona voters did the right thing by saying 'no.'"

Others opposed to the measure included Arizona Chamber of Commerce and Industry and Arizona Academy of Family Physicians.

Supporters included Republicans U.S. Sen. Jon Kyl and Rep. John Shadegg.

Even though the proposition has been defeated, Arizona lawmakers concede any Arizona reform bill is still a long shot. Arizona Rep. Phil Lopes (D-Tucson) concedes his effort to create universal health coverage in Arizona faces an uphill battle.

"I may get a second wind, but getting it passed is still going to be very difficult," Lopes said of Prop. 101's defeat. "The insurance companies oppose it, organized medicine opposes it, hospitals oppose it. Universal health care is going to be very tough to pass."

National Health Care Reform's Moment May Be Now

Now it's Barack Obama's turn. With the economy staggering, the Federal Government spending billions to help prop it up and the nation still engaged in two costly overseas wars, timing for health-care reform seems dreadful and yet, it could still happen. Obama ranks health-care reform third on his list of top priorities — behind addressing the financial crisis and passing an energy bill.

Health Care Reform certainly has its supporters. Despite suffering from a malignant brain tumor, Senator Ted Kennedy has returned to Capitol Hill. Principally, Kennedy says, because he wants to orchestrate passage of health-care legislation, "There's real momentum behind getting something big done." An adviser to the President-elect summed it with, "This could be the best chance we've ever had."

Three key developments over the past 15 years have made this moment possible. First, the number of uninsured Americans now tops 45 million.

Most important, the cost of health insurance to both the employers who provide it and the employees who pay premiums has continued to soar. Because of that, companies of all sizes — from corporate behemoths to corner stores — have switched sides on the issue of comprehensive reform. Having fought to defeat Clinton's plan in 1993, they are now some of reform's loudest advocates. "This is the No. 1 priority for small businesses," says Todd Stottlemyer, president of the National Federation of Independent Business. "We see it as a matter of national economic security."

An expected spike in unemployment will increase the rolls of the uninsured, driving more of them into emergency rooms and boosting premiums on the insured. Struggling companies may be forced to cut or kill their employee coverage just to survive.

Obama's plan does not mandate universal coverage except for children. It subsidizes low-income Americans who want to buy insurance and creates an exchange to give people access to health care at affordable prices — all reasonable and pragmatic steps. Still, a fight is inevitable. Health care represents 16% of the nation's economy, with vast and competing interests as stakeholders.

Is the Time Right for Universal Health Care?

Barack Obama has one overriding task: he must restore the strength and confidence of the American economy, and the sooner the better. But keep your eye on health care.

When FDR came into office in March 1933 after an even longer and even more unnerving transition period than this one, he had one overriding task and he set about it with great energy and creativity. He proved America could cope with the Great Depression, even though it took years and World War II to find great prosperity.

But the real story of the New Deal was one signature program ― Social Security. Passed in 1935 it reframed the crisis of the economy by focusing on the long-term security of the elderly. It has been America’s most successful and popular social program. And retirement security for the elderly helped keep the economy on an even keel through good times and bad.

In 1965, Lyndon Johnson signed the second great pillar of American social policy and created the Medicare program. But the third pillar, universal health care, has languished. Democratic presidents from Harry Truman to Bill Clinton tried and failed to pull the sword from the stone. These three programs are really the heart and soul of the Democratic Party, to turn principles into reality or to defend them once created.

Obama seems to be inclined to get to health care now and not later, although his timing is different than FDR. The economic crisis is so bad now constraints on spending are likely to be suspended. Only a huge economic stimulus can help the economy now. If Obama can make the connection between the economy and health care, the momentum may become irresistible. The most powerful argument, though, is one Obama made on the campaign trail in talking about his mother’s final days, that she spent her time not coping with her situation but on the phone arguing with health insurance companies. This really hits close to home.

Rising Hope For Fixing Health Care

Things are looking up for substantive reform of America's troubled health-care system.

No one who knows the history of such efforts, from Harry Truman's administration through Bill Clinton's, needs to be reminded of the difficulties that inevitably confront any plan to overhaul one-seventh of the U.S. economy and bring high-quality medicine to millions of the uninsured.

When Barack Obama's transition team let out word that former Senate majority leader Tom Daschle would be his choice to run the Department of Health and Human Services and to quarterback his work on health reform, it signaled Obama is serious about his campaign promise to make that issue a first-term priority.

Daschle would not leave a lucrative job at a law firm to twiddle his thumbs. Only with a clear understanding the new president will put his own political capital at risk in this cause would the South Dakotan sign up for the job.

Daschle can be of great help to Obama in achieving the goal. He has made his own in-depth study of health-care issues and brings a genuine passion to the subject. And he knows the Senate, where past efforts have foundered.

Senate Leaders Hold Closed-Door Meeting To Discuss Health Care Overhaul Legislation

There are positive signs within the Senate as well. Max Baucus of Montana, the chairman of the Finance Committee, one of the two main centers of Senate action, moved first by releasing a detailed outline of his preferred piece of legislation. Edward M. Kennedy of Massachusetts, the chairman of the other committee of jurisdiction ― Health, Education, Labor and Pensions ― quickly asserted his right to be at the center of action. He organized three task forces within his committee and reached out to Baucus to suggest their staffs start exchanging ideas as well.

Senate Health, Education, Labor and Pensions Committee Chair Edward Kennedy (D-Mass.) and Senate Finance Committee Chair Max Baucus (D-Mont.) in a meeting last week included other Senate leaders that discussed plans for health care overhaul legislation to be proposed next year, CongressDaily reports. Baucus after the meeting said, "All are dedicated toward getting meaningful health care reform enacted in this next year."

Baucus said, "We all agreed there has not been a better time in modern American health care to" overhaul the nation's health system. He added, "I think we have to move very quickly to seize the opportunity and build momentum because it's difficult to anticipate what else is going to come up next year that will involve the Congress." Baucus last week announced details of his universal health care proposal. Also present at the meeting were Senate Banking Committee Chair and second-ranking Democrat on the HELP Committee Chris Dodd (D-Conn.), HELP Committee ranking member Mike Enzi (R-Wyo.), Sen. Orrin Hatch (R-Utah), Sen. John Rockefeller (D-W.Va.); and Finance Committee ranking member Chuck Grassley (R-Iowa).

Kennedy and Baucus both have said a health care overhaul bill likely would not include offsets for its full cost. Grassley on Wednesday said, "I think for a lot of us, pay-go is a big issue," referring to rules all measures passed include funding offsets. Baucus said, "You have to invest in order to reap long-term savings," adding, "That's understood by senators; that's understood by outside groups. I talked to Congressional Budget Office Director Peter Orszag and that's understood clearly by him."

House Majority Leader Steny Hoyer (D-Md.) said while a health care system overhaul could increase the national deficit in the short-term, in the long-term it would stop adding to the deficit, according to The Hill. "Hoyer's comments are notable because he is considered the chief advocate of the Blue Dog Coalition and the pay-go policy in the House Democratic leadership," The Hill reports. Hoyer said, "Our objective is going to be to have a pay-go compliant policy over the longer term," but that "may not be possible in the short term, given where we are." He noted addressing health care problems and inefficiencies could reduce costs and limit the impact of an overhaul on the deficit. In addition, Hoyer said, "When it comes to health care, we can no longer think of entitlement reform and expanded access as two separate issues."

At a Finance Committee hearing last week, Baucus said a health care system overhaul "must be part of any successful economic recovery plan." He said, "Health care costs and the economy are linked: The key challenges of our health care system are high costs, low quality and insufficient access," factors that affect family budgets, competitiveness of U.S. businesses abroad and government spending.

The architects of the Clintons' defeat were Newt Gingrich and Bob Dole, then leaders of GOP forces in the House and Senate. Gingrich has now become an advocate for systemic change in the way health care is financed and delivered. His approach differs from Obama's, but it starts from the same premise: The current system is too wasteful and unproductive to be sustained.

And Dole, who in 1994 moved belatedly to opposing the Clinton effort as his own presidential ambitions rose, said last week today's circumstances make a repetition of those scorched-earth Republican tactics inappropriate.

Dole and Daschle have both worked for the firm of Alston and Bird for the past few years, and it would not surprise me if Dole finds ways to be helpful to Daschle and Obama in the coming fight.

Some have argued Obama will be forced to delay his promised effort at health-care reform, either because of the urgency of the economic problems facing the country or because there will be no money in the budget to pay for such an enterprise.

But every indication is he will not wait. Indeed, he could well argue the current plight of the Big Three automakers stems in part from the burden Ford, General Motors and Chrysler are carrying for the failures of our employer-based health-care system. One of their basic competitive disadvantages stems from the fact Japanese and other foreign carmakers are operating in countries where government and society as a whole ― not individual companies ― pay the costs of health care.

Finally, the Republican party is much weaker today than then. After Clinton won, conservatives could say Bush, Sr. messed things up for conservatives by raising taxes. This year, the collapse of the Bush regime has been so total and the Bush regime was so conservative, the Republicans are at a loss for direction. The logic for moving quickly on health care is also to act before the Republicans get themselves together again.

And so we may be seeing history made again following an historic presidential election ― perhaps the most significant change in American social policy since Medicare. The key to its success will be to remember the best programs are simple and have a clear justification not just for the numbers crunchers but in terms of what is fair and who is deserving. That is one reason FDR insisted Social Security be a contributory program, a recognition of the work performed in one’s lifetime. What the equivalent values are in health care may be a mandate everyone must have coverage but we do know it is important to find what they are.

5 Myths About Our Ailing Health-Care System

With Congress ready to spend $2 trillion to prop up the U.S. economy, enacting health-care reform may seem about as likely as the Dow hitting 14,000 again before the end of the year. But it may be more doable than you think, provided a few myths be dispelled about how health care works and how much reform Americans are willing to stomach.

1. America has the best health care in the world.

The United States is No. 1 in the amount we shell out for health care. We have the most expensive system in the world per capita, but we lag behind many developed countries on virtually every health statistic. Life expectancy at birth? We rank near the bottom of countries in the Organization for Economic Cooperation and Development, just ahead of Cuba and way behind Japan, France, Italy, Sweden and Canada, countries whose governments pay for the lion's share of health care. Infant mortality in the United States is 6.8 per 1,000 births, more than twice as high as in Japan, Norway and Sweden and worse than in Poland and Hungary. The obesity epidemic is out of control, our death rate from prostate cancer is only slightly lower than the United Kingdom's, and in at least one study, American heart attack patients did no better than Swedish patients, even though the Americans got twice as many high-tech treatments.

Moreover, the quality of health care is different in different parts of the country. The Centers for Medicare and Medicaid Services have issued a list of 26 measures of quality, such as making sure heart-attack patients being discharged from the hospital get a prescription for a beta blocker or aspirin to help reduce the risk of a second attack. It turns out that quality is all over the map, and it isn't necessarily better in the places we might expect, such as academic medical centers. Worse still, according to the Congressional Budget Office (CBO), there appears to be no connection between how much Medicare and other payers spend on patients in different parts of the country and the quality of the care the patients receive. You are no more likely to get that beta blocker or aspirin in Los Angeles than in Portland, even though Medicare spends twice as much per beneficiary in Los Angeles.

2. Somebody else is paying for your health insurance.

Even when your employer offers coverage, he isn't reaching into his own pocket to cover you and your fellow employees; he's reaching into your pocket, paying you lower wages than he would if he didn't have to pay for your health insurance.

Rising health-care costs are partly to blame for stagnant wages. Over the past five years, health insurance premiums have risen 5.5 times faster on average than inflation, 2.3 times faster than business income and four times faster than workers' earnings. Four times. That's why wages have been nearly flat since the 1980s, even as U.S. productivity has been going up. In effect, about half the money you should be earning for being more productive is being sucked up by ever more expensive health-insurance premiums.

If you pay taxes, you're also paying for the health care provided through state and federal programs such as Medicare, Medicaid, the Veterans Administration and the military. All told, the average family of four is coughing up $29,000 a year for health care through taxes, lower wages and out-of-pocket medical expenses.

3. We would save a lot if we could cut the administrative waste of bureaucracy

It is not administrative red tape that is driving health-care costs up faster than inflation. Most of the relentless rise can be attributed to the expansion of hospitals and other health-care sectors and the rapid adoption of expensive new technologies — devices, tests and procedures. What is the single ever increasing cost that drives the increase of all other health care costs ― prescription drugs and the ever increased use of prescription drugs to treat patients.

For the past 20 years the cost of prescription drugs has increased by 20% per year.

Prescription-drug prices soared in the US far outstripping the general inflation rate, according to a report from the University of Minnesota. Of the 195 drugs in the sample, 153 have been on the market for the past five years. "Cumulatively, the average manufacturer price increase for these 153 brand-name drugs was more than two-and-one-half times the general inflation rate — 35.1% compared with 13.5%," the report states.

With a 20% per year increase in prescription drugs cost, this drives all other health care costs to increase by 12% per year. These increases are major factors in the ever increasing costs of health care making health care across America unaffordable causing 47 million persons to drop out of the health care system and enroll in the category called "uninsured."

What drives prescription drug prices? It is the way prescription drugs are approved by the U.S. Food and Drug Administration (FDA) all in the name of "protecting the public welfare."

The FDA is responsible for approving every drug administered in the United States. This is done by approving the use of a prescription drug by granting approval to a drug company to manufacture a specific prescription drug.

It begins with the U.S. National Institutes of Health (NIH) and the annual budget is in excess of $26 billion for drug research by primarily private drug companies. Once a potential drug is discovered using NIH funds, the drug company applies to the FDA for approval. The FDA to protect the licensing of any potential drug issues a 20 year monopoly to the drug company to manufacture the drug. This is supposedly to protect the drug company investment in the research that discovered the drug but is a myth because it was the NIH that provided the research grant to the drug company that discovered pharmaceutical drug.

Pharmaceutical drug companies justify the annual NIH $26 billion to provide for research because of the high cost of research. The real reason is because instead of using private drug company funds being applied to research, the drug companies use their funds primarily for consumer marketing.

Now armed with a 20 year monopoly to manufacture the drug approved by FDA, the monopoly gives the drug company an exclusive preventing other drug companies from manufacturing the same drug. With control of the FDA sanctioned monopoly, the drug company can set the price of the drug justifying any price because of the required substantial research funds used in discovering the drug even though US taxpayers funded the research using research funds from the U.S. National Institutes of Health (NIH).

For 20 years, the prescription drug price is determined by the marketplace and the marketplace is driven by the drug companies marketing branded prescription drugs as the drug of choice to American consumers.

After 20 years, other drug companies anxiously await for the monopoly to expire so they too can manufacture the same branded drug as a generic drug.

But then just before expiration of the original monopoly, the drug company holding the monopoly approaches the FDA with a change in the original drug. By using the FDA "orange book," the FDA is authorized to extend the original 20 year monopoly with 6 month extensions for every change in the original drug approval. Examples of these changes are: shape of the original drug is changed from round to oval (or any other of a multitude of shapes is changed). Dosage changes are other examples. With each change the FDA approves an additional 6 months which means an additional $4-6 billion in additional revenue for the drug company.

With the pharmaceutical companies controlling the price of every branded prescription drug, the only way of circumventing the asking drug price is to buy in bulk.

The most noted buyer of prescription drugs in the United States is the U.S. Veterans Administration (VA). The purchasing power of the VA enables the VA to buy prescription drugs in bulk driving down the price to a discount price of 40%.

This is how the VA can significantly reduce the price of prescription drugs provided to US veterans.

This is important because this was part of the 2003 Medicare proposal to provide prescription drugs as part of Medicare.

The US House and Senate each approved bills that were taken to the Conference Committee for reconciliation. At the Conference Committee made up of 6 members from each chamber, Senator Jon Kyl supported by AARP introduced one sentence that increase the cost of the Medicare prescription drug program by $300 billion. Kyl added, "Medicare must purchase all prescription drugs at retail and not at bulk prices."

A $300 billion windfall for the pharmaceutical companies. This is an annual number that repeats with every passing year.

4. Health-care reform is going to cost a bundle.

Only if you think that covering the uninsured is our only priority. Yes, making health care available to all citizens is the right thing to do. But it isn't the only thing to do. We also have to fix the spectacularly wasteful and expensive way doctors and hospitals deliver care.

Our physicians are working within a truly dysfunctional, often chaotic system that prevents them from caring for us properly. Between 50,000 and 100,000 patients die each year from preventable medical errors. According to the Centers for Disease Control, 1.7 million Americans acquire an infection while in the hospital and nearly 100,000 of them die from it. Laboratory imaging tests are routinely repeated because the originals can't be found. Patients with such chronic illnesses as heart failure and diabetes land in the hospital because their physicians fail to monitor their condition. When patients have multiple doctors, there's often nobody keeping track of the different medications, tests and treatments each one prescribes.

Our doctors and hospitals are failing to provide us with care we need while delivering a staggering amount that we don't need. Current estimates suggest that as much as 20 to 30 percent of what we spend, or about $500 billion, goes toward useless, potentially harmful care.

There are two bright spots. One: We can improve the quality of care and cut costs without rationing. There are models out there for how to do it right — the Mayo Clinic, the Geisinger Clinic in Pennsylvania, the Cleveland Clinic and California's Kaiser Permanente are just a few of the organized group practices that are doing a better job for less. Their doctors are better than average at using the best medical evidence available. They're more likely to be using electronic medical records, which can help keep track of patients who have multiple physicians and need complex care. And they're less likely to provide unnecessary care.

Two: Even moderate reform of the delivery system would improve care and save money. The Lewin Group's analysis shows that a bill proposed by Sen. Ron Wyden, an Oregon Democrat, calling for a more comprehensive overhaul of the health-care system than either McCain's plan or Obama's could actually insure everyone and save $1.4 trillion over 10 years. More reform is cheaper.

5. Americans aren't ready for a major overhaul of the health-care system.

We may be readier than you think. A recent study published in the New England Journal of Medicine found that only 7 percent of Americans rate our health-care system excellent. Nearly 40 percent consider it poor. A whopping 70 percent believe it needs major changes, if not a complete overhaul.

Now is not the time to think small, to cover a few million Americans and leave the bigger job of controlling costs and improving quality for another day. We can't afford not to reform the delivery system as soon as possible. At 17 percent of gross domestic product, health care is the biggest single sector of the economy, and it's consuming a larger and larger proportion every year. According to CBO projections, health care will account for 25 percent of GDP by 2025 and 49 percent by 2082. That's simply unsustainable. Any plan that reforms health care has to do more than simply cover the uninsured.

Single-Payer National Health Insurance

Single-payer national health insurance is a system in which a single public or quasi-public agency organizes health financing, but delivery of care remains largely private.

Currently, the U.S. health care system is outrageously expensive, yet inadequate. Despite spending more than twice as much as the rest of the industrialized nations ($7,129 per capita), the United States performs poorly in comparison on major health indicators such as life expectancy, infant mortality and immunization rates. Moreover, the other advanced nations provide comprehensive coverage to their entire populations, while the U.S. leaves 47 million completely uninsured and millions more inadequately covered.

The reason we spend more and get less than the rest of the world is because we have a patchwork system of for-profit payers. Private insurers necessarily waste health dollars on things that have nothing to do with care: overhead, underwriting, billing, sales and marketing departments as well as huge profits and exorbitant executive pay. Doctors and hospitals must maintain costly administrative staffs to deal with the bureaucracy. Combined, this needless administration consumes one-third (31 percent) of Americans’ health dollars.

Single-payer financing is the only way to recapture this wasted money. The potential savings on paperwork, more than $350 billion per year, are enough to provide comprehensive coverage to everyone without paying any more than we already do.

Under a single-payer system, all Americans would be covered for all medically necessary services, including: doctor, hospital, long-term care, mental health, dental, vision, prescription drug and medical supply costs. Patients would regain free choice of doctor and hospital, and doctors would regain autonomy over patient care.

Physicians would be paid fee-for-service according to a negotiated formulary or receive salary from a hospital or nonprofit HMO / group practice. Hospitals would receive a global budget for operating expenses. Health facilities and expensive equipment purchases would be managed by regional health planning boards.

A single-payer system would be financed by eliminating private insurers and recapturing their administrative waste. Modest new taxes would replace premiums and out-of-pocket payments currently paid by individuals and business. Costs would be controlled through negotiated fees, global budgeting and bulk purchasing.

Single Payer Health Insurance

Dr. Rocky White, a former Republican, has become a leading advocate of single-payer, national health insurance.

You wouldn’t know it from the candidates’ debates or reports on the major television networks, but a majority of Americans favor a government-run health insurance system similar to Canada’s.

Those lining up to support single-payer health care include medical professionals, business people, and many Republicans. Dr. Rocky White has been all of those things.

White is a former Republican, from a conservative, evangelical background, who got interested in health care reform nine years ago when his own medical practice slipped into the red. His research into the health care system led him to conclude the problem wasn’t just in his practice — the health care system itself is broken, and a single-payer program is the most efficient way to fix it.

Under the single-payer system, doctors’ offices and hospitals remain private for-profit or non-profit institutions. But the federal government covers the bills for patient services, with funds coming from taxes. The patient gets the health care they need. Paperwork and billing are kept to a minimum. Employers no longer have the difficult task of choosing, administering, and paying for health insurance for employees. Everyone is covered.

The current setup is as complicated as single-payer is simple. Today, the discerning consumer must wade through a complex system of pre-existing condition exemptions, co-pays, and deductibles — if they have coverage at all. Arguments over billing among doctors’ offices, insurance companies, patients, and their lawyers eat up millions of dollars. An estimated $25 out of each $100 spent goes to paperwork, profits, and executive pay and bonuses. And disagreement over medical coverage is one of the most common sources of labor disputes for employers who have seen insurance premiums double since 2000.

With these inflated costs, it’s little wonder that in 2006, the last year for which government figures are available, 47 million Americans had no insurance at all, including 8.7 million children, or that 68 percent of bankruptcies in the U.S. come as a direct result of medical expenses among people who do have insurance.

A CNN/Opinion Research Poll last year showed 64% of Americans would be willing to pay higher taxes for a national health care system.

When White learned about Physicians for a National Health Program and their plan for a single-payer health care system, he saw it was similar to his own idea and he joined their effort.

Other medical professionals have had a similar reaction. The American College of Physicians — the largest organization of medical specialists in the country — endorses single-payer health care as does the California Nurses Association, the largest organization of registered nurses.

And so do 55 percent of Americans, according to a CBS News poll conducted in September. In another poll, 64 percent said they would be willing to pay higher taxes for a national health care insurance program.

In Congress, HR 676, the “Medicare for All” bill introduced by Representative John Conyers, Jr. of Michigan, currently has 90 co-sponsors — more than any other health care reform proposal — and the endorsement of the U.S. Conference of Mayors.

Support for single-payer health care is not just strong among progressives. George Swan, for instance, is a health care administrator, self-described “Purple Republican,” and a founder of Republicans for Single Payer.

“It’s about being American and doing what’s right,” Swan says. “What’s right is not paying a 30 percent premium to the insurance system and receiving sub-standard health care.”

Business owners are also supporting single-payer health care. For 25 years, Jack Lohman owned a company that provided cardiac monitoring services to hospitals. Today, he’s a co-founder of the Business Coalition for Single Payer. A “lifelong Republican,” Lohman argues conservatives should support single-payer because it’s pro-business.

“For the same 16 percent of GDP we are spending on health care in the U.S.,” he says, “we could provide first-class health care to 100 percent of the people.” And single-payer would “get health care off the backs of corporations so they can be more competitive with products made overseas.”

John Arensmeyer spent 12 years running an e-commerce company with 35 employees. Then he founded the Small Business Majority to advocate for the interests of small businesses, particularly on health care issues. Sharp rises in health care costs for small businesses are hurting their ability to survive, Arensmeyer says. “It’s antithetical to what we’re all about as a country, which is to allow people the freedom to go out and start new enterprises.”

Small business has often been portrayed as opposing health care reform, but SBM’s research shows small businesses are interested in being part of the solution — even if it means paying higher taxes.

Walter Maher, former vice-president of public policy at the DaimlerChrysler Corporation, sees the problems in similar ways, although he looks at health care costs through the lens of large corporate employers.

General Motors, he says, is paying people to leave their jobs so they can hire replacements at 50 cents on the dollar with reduced health benefits. “It’s sad,” he says. “You have a giant albatross around your neck because you choose to provide a good standard of living for your employees.”

Money in Politics

If the current system is so unpopular among medical professional, patients, and business owners, what’s keeping it in place? Most advocates for single-payer agree money in politics is the greatest obstacle to change. During the 2006 election cycle, the health care industry spent $99.7 million on campaign contributions. Lobbying on health care issues topped $446 million in 2007.

For Jack Lohman, that’s the crux of the problem. “Obama’s plans for health care is lousy,” he says. “Although Obama claims he is not taking lobbyist money, somehow this money is getting through. Obama is supporting health care that keeps the insurance industry involved.”

And all that money can buy a lot of misinformation and scaremongering. Rocky White says he finds people get interested in the single-payer approach if they understand what’s actually being proposed: “When people realize all that it is,” he says, “is a publicly owned insurance company, all of a sudden business people start to lose that fear that ‘Oh my God, we’re going to become the Soviet Union.’ Even Republicans say, ‘This really makes a lot of sense.’”

While White would like to see reform happen on a national level, he believes it’s more realistic to work at the state level for now. And for him, that means Colorado. White sits on the board of Health Care for All Colorado, a nonprofit, volunteer-run group with 250 members that includes Democrats, Republicans, physicians, business people, college professors, and economists. And he is running for a Democratic seat in the state legislature to add “the voice of medicine” to the debate.

“Any time a state has studied it, they find single-payer is the most cost-effective and covers everyone,” White says. His proposal for a single-payer system in Colorado is being studied by a blue ribbon commission created by the Colorado Legislature.

In May, the 6,000 delegates to the Colorado Democratic Party Convention endorsed a pro-single-payer resolution that will be forwarded to the national convention in Denver in August.

If one state can make a single-payer plan work, White believes, it could start a cascading effect similar to what took place in Canada during the 1940s and ‘50s.

“People are discouraged, they’re angry, they’re upset,” White says. “But politics is the process that drives policy, and if we don’t get involved in the political process we’ll never make a difference.”

Universal Health Care for Arizona Proposed

Is Arizona ready for universal health care?

Rep. Phil Lopes has introduce ambitious legislation to create a state health plan to cover all state residents. Everyone who has lived here for more than a year would be insured — sick or healthy, employed or unemployed, young or old, rich or poor.

The plan would do away with health care financing as we know it, pooling existing health care dollars from employers, Medicaid, Medicare and other payers to create a comprehensive insurance system. And Lopes says it can be done with the $30 billion now in the system and without new taxes or state funding.

But while Lopes' plan is sure to appeal to state residents fed up with the rising costs of health care and shrinking insurance protection, it is unlikely to even get a legislative hearing, let alone attract enough support in the Republican-led state Legislature to pass.

And it is destined to face the same opposition that has torpedoed every attempt to create a national health system in the U.S. over the past century: From insurance companies, which would see profits slashed. From hospitals and other health care providers, which would be subject to much tighter government regulations and price controls. And from citizens wary of government intervention. The government, or at least a quasi-governmental commission, would be involved in your health care and the "free market" would no longer reign.

Widespread support

An Arizona Republic poll conducted December 2005 found widespread support for universal health care, with 81 percent of registered voters surveyed saying it is time that the state or federal government step in and create a health care system that ensures everyone has access to the medical care they need.

But the subject is extremely dicey politically and there is pervasive skepticism that the state or country can afford it.

Dr. Eve Shapiro, a pediatrician from Tucson, is the state spokeswoman for Physicians for a National Health Program and a supporter of the Lopes plan. She insists there is enough money in the system; there are just a lot of profits in the system that interest groups work hard to protect.

"Politically it hasn't been able to be successful because of lobbying by vested interests like insurance companies," she said.

"It works around the world. . . . We have a very inefficient system. And every other country achieves better outcomes at a lower cost because they have a national system."

But government-heavy regulation is just not the American way. At least so say many opponents.

"The government never does things as well as the private sector," said Rep. Doug Quelland, a Phoenix Republican who is the chairman of the House Health Committee. Quelland wouldn't comment on Lopes' plan, since it hadn't yet been introduced, but said if it was anything like the Clinton health plan, he "wouldn't even entertain it" by giving it a hearing in his committee. And what about widespread public support for a universal system, such as found in the Republic poll? People "would favor free insurance for their automobiles, too, that doesn't mean we can afford it."

Opposing the concept

Blue Cross Blue Shield of Arizona spokeswoman Regena Frieden also would not comment specifically about Lopes' plan, but said her organization opposes the concept: "Reducing the uninsured is a goal we all share, but a single-payer system is not the solution," Frieden said. "We think, generally, private market solutions can be more flexible in delivering the products and services our customers want than a government system."

But supporters of health reform say they want the debate and the conversation and the thoughtfulness about health care to continue.

Dr. Merlin "Monty" DuVal, a Phoenix resident who was the founding dean of the University of Arizona's College of Medicine and a health official in the Nixon administration, supports Lopes' plan.

Although he doesn't think it is perfect, he wants people to talk about it.

"We have to take steps to get to universal health insurance," DuVal said. "This would be one place to start the conversation."

Jan Brewer Entry Clears Way for GOP to Define State Agenda

Gov. Janet Napolitano's appointment to the incoming Obama administration would put a Republican at the state's helm, potentially leading to harsher budget cuts and a U-turn on state policy governing everything from gun restrictions to abortion.

One thing is certain: It would dramatically alter the Arizona political landscape.

Napolitano's departure would place Republican Secretary of State Jan Brewer, 64, in control of the Governor's Office. It would be the first time since 2002 the GOP has controlled both the executive and legislative branches of state government, giving the party its best opportunity in years to enact a conservative agenda.

Brewer would serve the remaining two years of Napolitano's term, inheriting a state with a budget more than $1 billion out of balance, a flagging economy and a host of tough choices in terms of spending cuts.

The change in leadership could be most dramatic in how the state handles that shortfall.

Napolitano has blunted deep cuts with borrowing and fiscal maneuvers and has pledged to protect education and state services for children and vulnerable populations. Legislative Republicans have pushed for deeper cuts that might bring more pain in the short term but that they argue would be more fiscally responsible and potentially spare the need for big cuts later on.

The incoming leaders of the House and Senate said Brewer would offer the prospect of smoother budget negotiations, if only because all negotiators would be Republicans.

"Philosophically, we'll be a lot more in parallel with her," said Sen. Bob Burns, Senate president-elect.

The governor's handling of social issues such as abortion also figures to illustrate the philosophical shift from Napolitano to Brewer. Napolitano has repeatedly vetoed attempts to limit abortion, and some of those measures may be revived for Brewer.

Political ideology aside, Arizona State University pollster Bruce Merrill said Brewer's style "may be much more effective than Janet Napolitano has been in terms of working with legislators and reaching a budget deal."

Act Arizona, a Single Payer Health System

Obama's plan does not mandate universal coverage except for children. It subsidizes low-income Americans who want to buy insurance and creates an exchange to give people access to health care at affordable prices — all reasonable and pragmatic steps.

In Arizona, the challenge is to augment any health care reform legislation approved in Washington DC. Something will be approved in Washington but it is doubtful it will be universal coverage for all.

Using the above information as a starting point, an Arizona universal health care program that serves all Arizonans will be conceptualized drawing on the expertise of health care professionals and users of health care to provide a winning design that will be formatted in 2009 and marketed to Arizonans in 2010 to gain providers and consumers support in passage of an Arizona Initiative on the November 2010 state wide ballot.

None of this can be done in a vacuum and requires the support from all elements of the health care industry in Arizona.

This can only be done by all interested in a universal health care program to come together to conceptualize and plan such a program.

If you have interest in being part of this endeavor, you are invited to participate. Email me and you will be notified when meetings will held so you can contribute your expertise and concern in the pursuit of this endeavor.

Jon Garrido

Jon@JonGarrido.com

Some content from wire services

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