Drugs for Vouchers

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

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

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

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

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

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

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

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

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

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

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