The New Medicare, A Healthy Choice

Grace-Marie Turner Imagine that you've been suffering chronic stomach problems, so you ask your doctor to run some tests. The results come in, and there's good news and bad news.

The good news? Your doctor has been able to diagnose your rare disorder, and there is a new drug treatment that can reduce the symptoms and even begin to reverse the disease.

The bad news? "The drug is expensive," your physician tells you, "and, left untreated, your illness is life threatening."

If you live in a country with a government-run health system or have your health coverage through the Department of Veterans Affairs, you could be out of luck. New and expensive drugs to treat rare disorders are seldom covered in government-run health plans.

You're flabbergasted. "But," you protest, "my prescription drugs are covered by the government. Don't I have the best plan in the country?" Your doctor just shakes his head.

This may seem like a far-fetched nightmare. But for some, it's awfully close to reality. More worrisome still is that if some lawmakers get their way, the 42 million seniors eligible for the new Medicare drug benefit may soon face doctor visits just like this one.

House Minority Leader Nancy Pelosi just announced her "Democratic Prescription for Change." This is her plan to overhaul the new Medicare program and model it after the VA drug benefit.

Modeling Medicare Part D after the VA system would be a grave mistake.

Veterans risked their lives defending our liberty. But their government-sponsored prescription drug benefit doesn't offer them many freedoms of their own. The Veterans Affairs program buys all drugs for recipients of the program. But, as in all single-buyer systems, the buyer controls costs by limiting the number of drugs available. It makes the program more affordable for the institution paying for it. But it also makes the program less effective for those who depend on it.

There may be countless veterans who have had doctor visits just like the one above. The VA drug formulary, the list of drugs the benefit covers, includes just 19 percent of medicines approved by the FDA since 2000. And it contains only 38 percent of drugs approved in the 1990s. Veterans who can't afford to pay the full cost of drugs themselves simply don't have access to many of the most innovative, up-to-date medicines that could make their lives immeasurably better.

Luckily, it's not that way for the 29 million seniors currently enrolled in the new Medicare drug benefit. The system was actually designed to provide seniors with a wide range of choices while keeping drug prices down.

The benefit is provided by private plan managers, which receive subsidies from the federal government to provide prescription drug insurance. They compete fiercely against one another and negotiate aggressively with pharmaceutical companies to get the best bargains for their customers. This gives them an incentive to offer a variety of medications: Seniors who discover their drugs aren't listed will take their business elsewhere. And no law limits the number of drugs each plan can offer.

Seniors enrolled in the new plan are overwhelmingly satisfied - 78% according to a new survey by the Medicare Rx Education Network. Importantly, one in five enrolled seniors polled say the new benefit has enabled them to stop skipping or reducing the medications their doctors have prescribed.

The Medicare drug law's "non-interference" clause is what makes this innovative program work. It says that the government cannot step in and "negotiate" - i.e. coerce - drug prices and offerings for Medicare recipients. It leaves control over medications in the hands of insurers, seniors, and their doctors rather than bureaucrats.

It is this clause that makes the Medicare drug benefit, with its private-sector competition, so different from traditional one-size-fits-all government programs - like the VA drug benefit.

But it's exactly this clause that is under attack by lawmakers like Pelosi who wants to "make prescription drugs more affordable by allowing Medicare to negotiate lower prices." In other words, she wants to change the new Medicare benefit just as seniors are starting to benefit from it.

Striking the non-interference clause would turn Medicare into a single-buyer system, just like the VA plan. It may make the program a little bit less complicated. But it would also make it a lot more dangerous.

There are consequences, after all, to stemming the flow of life-saving medications. Imagine your doctor had told you this during your office visit.

"I've got more bad news for you," he might say. "Your drug plan has actually been found to lower life expectancy."

You might not believe him. But a Columbia University study recently found that the VA drug benefit plan does just that. Professor Frank Lichtenberg estimated that the limited VA formulary has lowered veterans' life expectancy by an average of more than two months.

Given the choice of a drug plan that is competing to offer you the widest range of choices at the lowest prices or a one-size-fits-all government run plan, which would you choose?

Grace-Marie Turner is president of The Galen Institute, a non-profit organization devoted to health policy research and education.

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