The new Gekkonian drug plan

Faced with a rising public sentiment (a sentiment egged on by the Clinton administration) in favor of the federal government guaranteeing prescription drug coverage for Medicare patients, congressional G.O.P members have been forced to react.

This is not an easy matter for Gekkonians. Any federal drug guarantee for the elderly creates great fear on the part of two major Gekkonian constituencies - health plans and pharmaceutical companies.  Managed care plans, already in grave financial straits, fear they’d be left holding the bill for any federally-mandated drug coverage.  And drug companies fear they’ll be faced with federal price controls. 

So in an election year the Gekkonians are left in the unenviable position of having to show their support for prescription drug coverage on one hand, and yet of not abandoning their allies – the health plans and drug companies  - on the other.

In response to this need, House Republicans have hashed out a Medicare drug benefit plan.

The proposed Republican legislation would create federal subsidies for private insurance companies, to entice those companies to create a new form of insurance that covered only prescription drug costs.  Despite the steadfast assertion of major health insurance companies that they do not intend to sell such insurance, Republicans propose to set $40 billion aside to subsidize it.  In the “unlikely event” that private drug insurance would not change their minds, the government would become the insurer of last resort under the G.O.P. plan.

In addition, the Republican plan calls for creation of a new federal agency (the Medicare Oversight and Management Administration) to oversee drug benefits and Medicare HMOs.  This new agency, unlike present Medicare administration, would be biased in favor of free-market solutions to the problems of the Medicare population, and would (so they say) actively avoid the complex and difficult regulations so favored by current administrators.

DrRich comments:

The Gekkonians have to do something about prescription drug coverage for Medicare patients. The Clintonians and the press have created a public fervor for drug coverage that appears to have dwarfed the other major “pending” health care legislation of the season – the so-called Patient Bill of Rights. 

The proposed Republican drug plan is, of course, unworkable.  Health insurers know better than anybody the perils of covering prescription drugs – the cost of which is growing at more than 15% annually.  They’ve been taking a major bath on drug coverage already – having to cover prescription drugs is a major reason for the demise of many HMOs, especially Medicare HMOs.

Furthermore, private drug insurance – even if rendered relatively cheap to consumers by large federal subsidies – would be purchased only by individuals who knew or strongly suspected that their drug bills would be higher than the predicted $30 - $40 per month it would cost for drug insurance.  To an actuary, in other words, only the “losers” will buy such insurance. Individuals who are fairly certain not to need a lot of prescription drugs will save the $40 per month in insurance premiums, and use the money to buy premium cable channels instead.  And insurance companies absolutely need these individuals – they’re the ones who provide the profit.  To private insurers, the Republican plan is a non-starter.

The Republicans know this, of course. That’s probably why they’re putting a poison pill in their legislation – namely, creating a new federal agency that is friendly to free-enterprise, for-profit health care.  This provision is destined to enrage the Clintonians – the chief one of whom will surely veto such a bill.

But as some Republicans have admitted to Robert Pear of the New York Times (June 12, 2000), in this election year “the fact that they have a plan and are trying to pass it is more important than the content of the plan or whether it actually becomes law.”

06/17/2000

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