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About Northwest labor press. (Portland , Ore.) 1987-current | View Entire Issue (Jan. 20, 2006)
Inside MEETING NO TICES See Page 6 V olume 107 Number 2 J anuary 20, 2006 P ortland All aboard the gravy train! Seniors are the supposed beneficiaries of the new Medicare Prescription Drug Benefit, but the closer you look, the more it seems like it was set up to benefit drug and insurance companies By DON McINTOSH Associate Editor In the beginning, Medicare was a simple idea: The government would help pay the medical expenses of the old. Sign up at age 65 — get a Medicare card, and present the card when you go to the hospital or doctor. They bill Un- cle Sam for most of the expense. You focus on getting better. Set up in 1965, Medicare is a single- payer health insurance system — for senior citizens. It’s funded by a small payroll tax paid by workers and employers, plus monthly premiums paid by those en- rolled, plus a direct transfer from the government’s general revenues. Medicare was an extension of Presi- dent Franklin Delano Roosevelt’s New Deal, and was seen by its authors as a stepping stone to universal health care. It came about because of 10 years of ad- vocacy by the AFL-CIO and a landslide victory for Democrats in the 1964 elec- tions. Because it’s a simple concept, with a uniform benefit and universal eligibil- ity, it’s very efficient. Medicare’s ad- ministrative costs are 1.6 percent. But in the reinvention of Medicare that is now under way, simplicity and efficiency have lost out to ideology and special interests. The ideology is market ideology. The special interests are drug and insur- ance companies. On Jan. 1, Medicare expanded into paying for prescription drugs. Medicare could have issued a drug benefit card to all seniors, directed all pharmacies to send a bill to an address Building Trades Council first labor group to back Kulongoski for re-election The Oregon State Building and Construction Trades Council (OSBCTC), the statewide organization representing a majority of Oregon’s construction unions, has endorsed Democrat Ted Ku- longoski in his bid for a second term as Oregon governor. “Ted Kulongoski has been a very good governor for the state of Oregon. His commitment to getting Oregonians back to work has been effective and is a breath of fresh air for Oregon politics,” said Bob Shiprack, executive secretary of OSBCTC. “Governor Ku- longoski has earned the endorsement of our 30,000 members and their families.” Construction trades delegates praised Kulongoski for his work in rebuilding Oregon’s economy and for supporting critical trades issues, ranging from prevailing wages to working conditions. Ku- GOV. TED KULONGOSKI longoski was commended for bringing jobs back to Oregon fol- lowing the state’s economic downturn in 2001, and for improving the state’s fiscal affairs. He also received high acclaim for securing much-needed capital improvements in the state’s transportation infrastructure, which had gone lacking for too many years. “Ted has balanced job creation and our environment. He appreciates both, as do most Oregonians,” said Shiprack. “The governor has accomplished a great deal without the normal political bragging, and the Oregon Building and Construction Trades members appreciate his efforts.” Shiprack also recognized Kulongoski’s efforts as insurance commissioner “in establishing Oregon’s revamped workers’ compensation system that protects injured workers, which is now the envy of many other states.” He added that the Oregon governor played a key role in the creation of construction jobs by streamlining the state’s construc- tion permitting process. Shiprack noted that job growth spurred by Kulongoski’s initiatives has attracted more young adults into the field, enhancing the future vitality of Oregon’s construction trades. The Oregon State Building and Construction Trades Council is an umbrella organization comprised of 26 affili- ated union locals representing more than 30,000 construction workers. in Washington, D.C., and used the com- bined purchasing power of 42 million enrollees to bargain with drug compa- nies for the best deal possible. But the architects of the new drug program believe in market ideology. So instead, the government created a completely artificial market, in which nearly every feature is defined by the law. In this “market,” new entities called “Prescription Drug Plans” compete with each other — with marketing and advertising — for participants. For every participant the plans sign up, the government pays the plans a certain amount. It’s called capitation. Just as decapitation is head subtraction, capita- tion is head addition — the plan counts heads, sends the bill to the government, and the government pays a per-head bounty. So rather than bill the government, pharmacies bill the middlemen, and the middlemen bill the government. The formula by which the plans are reim- bursed eludes easy explanation. But it’s enough to cover the plans’ administra- tive and marketing costs, and profit. “Every time you see a mailing or piece of advertising for one of these plans, that’s a dollar that could have gone for lowering drug prices,” says Bill Vaughan, senior policy analyst for Consumers Union, the group that pro- duces Consumer Reports magazine. Humana, a Kentucky-based health benefits company, is reportedly spend- ing $80 million on outreach efforts for its prescription drug plans. Aetna plans to spend about $50 million, and other companies are dedicating substantial amounts. Presumably they expect to get back every penny. In addition, Pharma- ceutical Research and Manufacturers of America (PhRMA), the drug industry lobby group, is hiring public relations firms like Oregon-based Ulum Group to tout the merits of the new program at outreach, education and enrollment events. PhRMA didn’t respond to Northwest Labor Press requests for in- formation on how much its outreach ef- fort is costing. Medicare itself is spend- ing $500 million on publicizing and explaining the new program, and has assigned over 9,000 employees to an- swer questions about the new benefit. The new program’s administrative costs will be 12 to 13 percent the first year, according to Medicare estimates — more than six times the cost when Medicare doesn’t deal with a multitude of middlemen. “There’s an ideology that private plans are more efficient and save money,” says Bob Berenson, senior fel- low at the Urban Institute, a Washing- ton, D.C. think tank. “But the facts on the ground are that adding private plans in Medicare costs extra money.” Berenson points to Medicare’s ear- lier move toward privatization, called Medicare+Choice. Medicare+Choice allowed Medicare participants to enroll in private insurance plans in place of traditional Medicare, with Medicare picking up the tab. Medicare+Choice was created by the Balanced Budget Act of 1997, and it was supposed to save Medicare money through the mir- acle of private-sector efficiency exem- plified by the new breeds of health in- surance: HMOs and PPOs (Health Maintenance Organizations and Pre- ferred Provider Organizations.) Within three years, the government’s own budgetary watchdog agency was reporting that the new program was costing Medicare more, not less. In an August 2000 report to Congress, the General Accounting Office concluded that Medicare was spending 21 percent more per enrollee. Did those facts cause a rethinking of market ideology? No, Berenson says. Ideologies are impervious to evidence. In fact, the Medicare Modernization Act of 2003, which created the new Medicare Drug Benefit, rewrote the rules to favor private insurance plans even more. Medicare+Choice was re- named Medicare Advantage, with all the advantage going to the private plans. In a nutshell, Medicare is funding its own competition, and so generously that Medicare Advantage can afford to offer greater benefits to seniors than tra- (Turn to Page 8)
