Special Report: Most Women Will Lose Under New Prescription Drug Bill; Future of Medicare at Risk While Drug Costs Rise

December 5, 2003

NOW President Kim Gandy called the recently passed and erroneously titled Medicare Prescription Drug, Improvement and Modernization Act of 2003 (H.R. 1) "a cruel deception that George W. Bush and the right-wing leadership in Congress have played on older women." "Because older women utilize more prescription medications and, on average, have less retirement income, they will face a new hardship when this legislation takes effect in 2006," Gandy charged.

In fact, most older women—regardless of income—will lose under this regressive bill that forces radical changes in the successful and popular senior health insurance program that guarantees health care for every retiree. The Republican plan is a partial privatization of Medicare that would entice beneficiaries to join private, supposedly competitive managed care plans and use "premium supports" (vouchers, really) to help them pay for prescription medication. And a large proportion of seniors who fall into a so-called "doughnut hole" will get no help with prescription drugs even though they continue paying monthly premiums. It is estimated that about half of seniors will have no assistance for their costs of medication for at least part of the year.

Women Should Be Outraged

Women of all ages should be outraged by this betrayal of older women and disabled persons, Gandy says, and should organize feminist voters to oppose legislators who supported H.R. 1. For those senators and representatives whose voting records on NOW's priority issues are otherwise good, activists should discuss the many flaws of this legislation. Keep in mind that many legislators were targeted by an extensive advertising campaign in their home districts, exerting pressure on them to vote for the Republican bill. Ask them to support corrective legislation. Health care will be a top issue in the presidential election and it is imperative that we elect lawmakers who will promote legislation that makes health care affordable for everyone, young and old.

No Guarantee—Analysts predict that costs will go up for those seniors leaving traditional Medicare in order to get a slightly more generous drug benefit. They note that there will be no guarantee of coverage as there is in the government-run Medicare; private insurers can raise premiums and deductibles, while reducing coverage and dropping patients. At the same time, seniors remaining in the traditional Medicare program will face a continued spiraling of drug costs and higher premiums, followed by a predictable collapse of the program because of onerous spending caps contained in H.R. 1 and by the fact that this bill prohibits the government from negotiating with drug companies for lower prices.

Here is the core problem: The Republican plan transfers the emphasis from government-guaranteed patient care to managed care plans (HMOs, PPOs), whose bottom line is a healthy profit margin not the health and welfare of our over-65 population. In leaving traditional Medicare, seniors will be on their own in trying to figure out which managed care program is best and most affordable, with costs and coverage changing from year to year. Naturally, companies will try to maximize their earnings and seniors will be responsible for paying for ever-increasing costs with shrinking vouchers.

Gandy notes that nearly 40 years of progress in extending affordable health care coverage to older persons and disabled individuals has been overturned with H.R. 1. Especially disadvantaged will be those older women who are single divorced, separated and widowed—who have dramatically less income because of pension inequities and uncompensated years out of the workforce caring for children or ill relatives and fewer savings due to systematic pay discrimination.

Drug Costs Will Rise—H.R. 1 turns good public policy on its head by providing more benefits for wealthier seniors, fewer benefits to low income seniors and a potential dismantling of traditional Medicare that will be serving poorer, sicker seniors and disabled persons. Most egregiously, the bill does not address the core problem of skyrocketing drug costs where U.S. residents pay 200-400% and more for prescription drugs than do patients in other countries. The new law will exacerbate the problem by prohibiting the government from using its bulk buying power to negotiate lower prices and it prevents re-importation of safe drugs from Canada. Even the modest drug discount card issued to low-income Medicare beneficiaries beginning in 2004 will have less and less buying power as drug prices increase.

The priorities expressed in the Medicare prescription drug bill are all wrong, not only by giving a boost to wealthier and healthier seniors and penalizing poorer, sicker and disabled seniors. They are also wrong by completely avoiding what experts recognize as the number-one problem for older persons: access to affordable long-term care in nursing homes and home health care programs. With the imminent retirement of a generation of millions of baby boomers, these unwise and regressive changes in Medicare portend a long-term disaster for the next senior generation.

AARP Sells Out—The AARP, the 35 million-member retired persons' organization, played a pivotal role in the process by working closely with Republicans in drafting the bill. Some lawmakers and activists were infuriated with what they saw as a "sell out" of seniors by AARP in the legislation and, indeed, many of the provisions desired by the AARP board were not in the final bill. AARP was accused of having a serious conflict of interest in that the organization stands to make millions in insurance royalties and investment income when a privatized Medicare takes effect.

When this information about AARP's financial interests was disclosed and the organization's support of the Republican Medicare prescription drug plan was announced, AARP's phones lines were swamped by thousands of callers canceling their memberships. To ensure passage of the legislation, AARP reportedly spent $7 million in television and newspaper advertisements.

Tellingly, AARP's executive director, Bill Novelli, wrote the preface to Newt Gingrich's new book on health care which promotes a range of market-based solutions to providing care. In the past, Gingrich has advocated for the elimination of entitlement programs such as Medicare. News reports indicate that for some time AARP officials have been meeting quietly with right-wing Republican politicians, with insurance companies and health care industry officials to develop the legislation. The question remains as to how popular the changes will be with the huge AARP membership; a poll taken in late November by the AFL-CIO with Democratic pollster Peter D. Hart found that only 18 percent of AARP members approved of AARP's endorsement.

"The Republican plan heads us the wrong direction," Gandy says. "Instead of destroying Medicare, we need to expand the Medicare structure to cover the 43 million uninsured in this country. H.R. 1 moves us even further from reaching this important national goal of universal health care coverage."

Sham Prescription Drug Benefit

NOW and other critics assert that because of woefully insufficient funding ($395 billion), only 20% of total prescription drug costs over the ten-year period can be covered. To give an idea of the thinness of the benefit, here is one quick example: For the first $2,000 of coverage, a senior will pay over $1,100, for the first $5,000 of coverage, the senior will pay approximately $4,000.

When the privatized program begins in 2010 seniors can buy coverage with an estimated monthly premium of $35, pay a deductible of $275, then coverage would take effect paying 75% of prescription drug costs between $275 and $2,250. Then from $2,250 to $5,100 in annual prescription drug costs there would be no help for seniors they would have to pay for all prescription medication up that amount even as they continue to pay monthly premiums! After the $5,100, insurance would pick up about 95 percent of costs. The gap means that about half of all beneficiaries will have no coverage for at least part of the year.

CBO Predicts Increases—There is nothing in the bill's language to hold private insurers to those premium and deductible amounts. The legislation allows amounts to rise with the inevitable increase in the costs of prescription drugs. The Congressional Budget Office (CBO) predicted that seniors will face annual increases in premiums and deductibles for the drugs that they buy under the new plan. Within one year, CBO says that the deductible amount and the size of the coverage gap will grow by 10 percent. By the eighth year, those amounts are projected to grow by 78%—a $445 deductible and those with sizable drug bills would have to pay for more than $5,000 in drug bills.

• Causes a potential loss for two to three million retirees of employer-provided drug coverage—if incentives for those employers to retain coverage are not adequate.
• Disqualifies up to 6.4 million seniors who will not receive low-income protections because of an unfair "assets test."
• Risks a loss of Medicaid coverage for six million "dual eligibles" (persons with very low incomes and/or are disabled) who will have to pay more for medicine.
• Forces spending caps that will create a false fiscal crisis in traditional Medicare and may spell the end of the program.
• Imposes "means testing" to require retirees who earn more than $80,000 to pay higher premiums for part B Medicare a test most seniors oppose.

The story behind the Medicare prescription drug bill is that Republicans wanted this bill passed so that they might claim a sizeable chunk of the senior vote in the 2004 elections. Senior citizens have traditionally voted Democratic and, in fact, the idea of a prescription drug benefit emanated from the Democrats. But the difference is that Democrats wanted the benefit under the traditional Medicare program and most did not want to see a privatization of the senior health program.

Billions in Subsidies—The opportunity to use the prescription drug benefit idea to dismantle Medicare an entitlement program that right-wing Republicans have never liked plus tapping into public funds to reward their health care industry benefactors was great with H.R. 1. The legislation is loaded with billions in subsidies to hospitals, health insurance companies, and physicians and other service providers. It offers a great windfall for pharmaceutical companies by letting them mark-up the price of drugs to whatever level the market may bear and by preventing the re-importation of safe drugs from other countries.

The Medicare prescription drug legislation was basically written in secret by the Republican leadership, with heavy input from the health care industry. Democrats, with exception of Senators John Breaux (La.) and Max Baucus (Mont.), were kept out of the process. The language of the conference agreement was released little more than 24 hours before the House was to vote on the 1,100-page bill. Few members had time to read the fine print. But the Democratic leadership put up a good if losing fight. House Democratic Leader Nancy Pelosi (Calif.) undertook a heroic effort to unify Democrats against the bill, calling it "a historic hoax on 40 million seniors and disabled Americans."

H.R. 1 passed the House on Nov. 22 by the narrowest of votes: 220-215, after a rule-breaking delay of several hours when George W. Bush had to twist the arms of a few recalcitrant Republicans to produce the majority vote. In the Senate, Democratic Senators John Kerry and Ted Kennedy (both of Mass.) attempted to filibuster the bill, but this failed by 70 to 29 and then Senate Democratic leader Tom Daschle (S.D.) attempted to stall the legislation by objections related to the Budget Act, but this failed as well (61-39). The final Senate vote on November 25 was 54-44, with 11 Democrats joining Republicans to support the bill. (See how they voted.) Bush is scheduled to sign the bill on Dec. 8.

Unprecedented Corruption

H.R. 1 should become known as the most generous holiday gift ever because of the billions in public funds it will pay to private interests. According to the Alliance for Retired Americans, a labor-backed senior organization, the pharmaceutical industry will realize perhaps as much as $139 billion in profits over the next ten years. Private insurance companies will get $12 billion as an encouragement to provide coverage in certain areas. Doctors, hospitals and other service providers in rural areas will be paid $25 billion over the ten years. Managed care organizations (HMOs, PPOs), hospitals and physicians will be paid more for treating Medicare beneficiaries. Finally, businesses will receive $86 million worth of payments and tax benefits ($70 billion in direct payments and $16 billion in new tax breaks).

There is a deep pattern of influence the drug industry has exerted on politicians with contributions exceeding $650 million 80% of which to Republicans. For instance, in recent years, Sen. Orrin Hatch (R-Utah) received $788,793 in contributions from pharmaceutical interests; Sen. Charles Grassley (R-Iowa), the powerful Finance Committee chair, received $325,252; Rep, Nancy Johnson (R-Conn.) received $327,991 and Rep. Bill Thomas, chair of the all-important House Ways and Means Committee, got $440,162. For more: see www.opensecrets.org

The Washington Post reported (Nov. 22) that more than three dozen of George W. Bush's fundraisers are affiliated with companies that stand to benefit from the Medicare legislation. Firms representing Pharmaceutical Research and Manufacturers of America, Johnson & Johnson, Abbot Laboratories, Pfizer, Inc, Federation of American Hospitals and HCR Manor Care are known to be raising millions for Bush's re-election.

More Information

A Medicare Calculator: Use KaiserNetwork.org's Medicare calculator to see how much you or your mother will have to pay under the Republican plan.

Other websites that contain useful information include: Alliance for Retired Americans, a labor-backed seniors' group; Institute for America's Future, the National Committee to Preserve Social Security and Medicare; the Center for Economic Policy Research; the Center for American Progress, and OWL, the Older Women's League. Families USA offers handy charts and analyses of how the plan will work and the Center on Budget and Policy Priorities features detailed policy analyses of the expected impacts of H.R. 1.

State Reports: Institute for America's Future produced a series of reports showing the local impact of the Republican prescription drug deal, with state-specific data showing beneficiary out-of-pocket costs, including rising drug prices, premiums and deductibles) and the effect of program privatization.

About AARP: Visit the website of Public Citizen to read about the AARP's conflict of interest and the impressive earnings the organization receives through insurance royalties, investment income from insurance products, selling membership lists and other business arrangements. Additionally, you may want to send a message to AARP about their involvement in the Medicare prescription drug debate.

Medicare Guide for Candidates: The Medicare Rights Center features a detailed report on what an improved Medicare program should look like. It is intended for discussion during the 2004 presidential election campaigns.

How they voted: The following 16 Democrats voted for H.R. 1: Cramer (Ala.), Dooley (Calif.), Boyd (Fla.), Marshall (Ga.), Scott (Ga.), Alexander (La.), John (La.), Peterson (Minn.), Pomeroy (N.D.), Carson (Okla.), Wu (Ore.), Davis (Tenn.), Hall (Texas), Stenholm (Texas), Matheson (Utah) and Boucher (Va.). The 11 Senate Democrats who voted for the bill are: Baucus (Mont.), Breaux (La.), Carper (Del.), Conrad (N.D.), Dorgan (N.D.), Feinstein (Calif.), Landrieu (La.), Lincoln (Ark.), Miller (Ga.), Nelson (Neb.) and Wyden (Ore.). Hold them accountable for their votes and decide whether you can support them in the 2004 elections.