The debate over how to add an outpatient prescription drug benefit to Medicare is usually framed as a struggle between Republicans who favor a privately managed benefit and Democrats who want a government-managed one. The actual proposals rightly are more complex.
Election-year rhetoric aside, Republican candidate George W. Bush has recognized that he couldn't allow private insurers to cover whichever drugs they desire, with an eye on top profit. Bush acknowledged the need for oversight last week, proposing that "all the policies available through Medicare . . . be approved by the federal government to ensure the proper benefits are offered, and to provide seniors with clear information to compare the plans available."
Most members of Congress support the way Medicare and Medicaid ration care--for example, covering emergency room visits but not most cosmetic surgery. The government will have to extend that logic to any new Medicare benefit. With drug prices soaring 15% a year and consumer spending on prescription medications expected to rise from $91 billion in 1998 to $243 billion in 2008, taxpayers cannot afford an open-ended prescription drug entitlement.
The United States would do well to look at Australia, whose health care system pays only for a certain number of well-proven, cost-effective drugs; it covers anti-cholesterol drugs and beta blockers to prevent repeat heart attacks but not Viagra for impotence or Fosamax for osteoporosis. Other industrialized nations trying to curb spending on prescription drugs, including Britain, the Netherlands and Portugal, are eyeing Australia as well.
The drug plans of Bush and his Democratic rival, Al Gore, differ in many details of eligibility and premium levels, and in a more fundamental way: While Gore would have Medicare publicly negotiate drug price discounts for all beneficiaries, Bush would funnel Medicare dollars to dozens of insurers, which would each privately negotiate prices with drug companies, much as private Medi-Gap programs do today.
Gore's plan is far costlier to taxpayers, perhaps unmanageably so in the long run. The enthusiasm of drug company investors and executives for Bush's plan highlights its weakness: It would reduce the government's power to negotiate price discounts. The current inequities are undeniable. According to recent congressional studies, U.S. consumers pay $108.48 for a month's supply of the anti-cholesterol drug Zocor, while Mexicans pay $65.40 and Canadians only $49.20. Similarly, the tab for the anti-ulcer drug Prilosec is $119.01 in the United States, $51.60 in Canada and $34.50 in Mexico. Canada uses central purchasing to win discounts, and drug companies seeking emerging markets often offer Mexico lower prices.
If Congress and the next president don't act, the states are ready to step in. Maine Gov. Angus King recently signed the nation's first pharmaceutical price-control legislation, requiring makers to provide the state's consumers the same discounts they give the federal Medicaid program--an overall 40% difference. Similar bills are pending in other states.
A bill in Congress by Rep. Thomas H. Allen (D-Maine) that would allow pharmacists to buy drugs for Medicare beneficiaries at the same discounts now given to Medicaid and the Department of Veterans Affairs was widely supported but is now stalled in election-year politics and drug company lobbying. Amendments by Sen. James M. Jeffords (R-Vt.) and Rep. Tom A. Coburn (R-Okla.) that would allow the re-importation of U.S. drugs that can be purchased abroad at lower prices are likewise going nowhere.
U.S. consumers, whose tax dollars have paid for a large share of drug research, are sick of high drug prices, and those who are stuck with the worst deals are uninsured seniors. Both political parties must tell voters more clearly how they would get the most for a buck and make the plans affordable to taxpayers.