Sickening

20 June 2005



Bush’s Sale of Medicare Prescription Plan is Pitiful

President Bush is probably not an authority on Prussia’s Frederick the Great, but he does act on the late Emperor’s adage “L'audace, l'audace, toujours l'audace.” In selling his Medicare prescription “benefit” package in Minnesota on Friday, Mr. Bush exhibited audacity in spades. The government will pick up 95% of prescription drug costs for low-income seniors after they have shelled out more than 20% of their annual income. Mr. Bush says this is a good deal.

The problem stems from two factors. First, there are a lot of old people in America who are poor. Social Security has done a terrific job in many respects, providing the elderly with a subsistence income even if every other source of money vanishes (job, investments, pension, etc.). But the elderly poor remain. The other factor is the ridiculous pricing structure of the American drug industry.

To combat the problem, Mr. Bush has signed legislation that will allow those over 65 (as well as those with developmental problems, mental illness and HIV/AIDS) and whose income is less than $15,000 a year (magnanimously raised to $19,000 for couples – how’s that for a marriage penalty?) to participate if they sign up by January 1. After getting through 16 questions on a 4-page government form, participants get to pay the first $250 themselves as a deductible. They pay 25% of the next $2,250 in drug costs, while Medicare picks up the rest. Between $2,500 and $5,100 there is no coverage at all. After $5,100, Medicare will pay 95% of everything else. So, a person with a couple of chronic conditions will have the princely sum of $9,900 (or less) to live on before the government’s 95% offer takes over.

Magnifying this situation is the insane way in which US drug prices are managed. For example, it is against the law for Medicare and Medicaid (healthcare for the indigent) bureaucracies to negotiate volume discounts from drug manufacturers. One would think a Harvard MBA president would understand this kind of leverage. Such rules make it cheaper for many to import drugs (still illegally in some instances) from Canada (many of which were made in the US in the first place) despite the transportation costs. And why is it that a Lipitor prescription that costs US$100 is only US$47 when filled in Mexico? Americans hate to hear that Canada does some things better, but can't believe Mexico does; yet, that price difference is a fact. Moreover, cheaper and therapeutically identical generics are not encouraged in Medicare or Medicaid.

Americans spend more than anyone else in the world on healthcare, topping second place Canada by about US$1,000 per person per year (and more Yanks are uninsured than there are Canadians in existence by about 14 million). But Americans have the same life expectancy as Costa Ricans, who spend about US$300 per capita. Meanwhile, US pharmaceutical companies spend two and a half times as much on marketing and advertising as they do on research and development. Mr. Bush has the right problem, but his solution is really not a solution at all.



© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
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