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Medicare drug plan locks in high prices

Published Dec 22, 2005 8:59 PM

An incredibly complex Medicare drug plan is due to go into effect on Jan. 1. More than 60 percent of seniors polled say they can’t make head or tail of it. Only 20 percent say they’ll enroll by the first of the year, despite the high-volume scare campaign by the government and the insurance companies warning that they will pay a penalty for enrolling later. “I have a Ph.D., and it’s too complicated for me,” says William Beard, 73, a retired chemist in Wichita, Kan.

NYC march and rally for universal
health care, Nov. 12.

And no wonder there is confusion. The plan contains few specifics about what it will cost the consumer. Those “details” can only be ascertained by investigating the many different private plans that may be available in your area—and may not.

In fact, if this can be called a government benefit plan, the benefit is not going to seniors and disabled people covered under Medicare. The legislation setting it up—the Medicare Modern ization Act of 2003—was crafted by the drug companies and their flacks in Congress. It ensures that the benefits go to them: the owners of the pharmaceuticals, already the most profitable sector of the capitalist economy, with sales in the hundreds of billions of dollars each year. Also on the gravy train, of course, are the insurance companies that will be selling coverage to Medicare recipients under this plan.

These super-rich corporations have contributed millions to the political campaigns of key congressional leaders, as well as the president. Now, in their view, it’s payback time.

The amount people in the U.S. spend on prescription drugs has been rising at a steep rate for years—especially since the pharmaceuticals got the laws changed to enable them to advertise their pills on television. By 2000, the drug companies had increased their spending on promotion to $15.7 billion a year. In 2001, the pharmaceuticals took in $132 billion in sales—20 percent more than a year earlier. About 20 drugs accounted for half the increase—reflecting the effectiveness of advertising to boost these companies’ revenues. In this period, the rate at which drug prices increased tripled the rate of inflation.

By 2002, the average senior on Medi care spent $860 a year out-of-pocket for prescription drugs, according to the Congressional Budget Office—more than what they spent on physician care, vision services and medical supplies combined.

But the drug companies wanted even more.

Losing business to Canada

As the prices of drugs soared and demand increased, more and more people began looking elsewhere for their medicines. The same companies that sell prescription drugs in the U.S. also sell them in other countries around the world, including Canada. The U.S. is the only industrialized country with no regulations limiting drug prices, so the same pills are much more expensive here. As a result, by the summer of 2004, at least 1 million people living in the U.S. were filling their prescriptions in neighboring Canada, at a considerable saving.

Even though Washington was threatening to make it illegal, and even though the U.S. drug companies were threatening to cut off their Canadian distributors, senior groups started chartering buses to go buy their medicines in Canada. Even with the cost of the trip factored in, it was still considerably cheaper.

Soon cities, towns and even states were trying to make arrangements for their residents to buy cheaper medicines from Canada.

The city of Springfield, Mass., for example, arranged for its 3,000 public employees to get cheaper drugs from Canada. “We can save anywhere from $4 million to $9 million on an annual basis if I get everybody enrolled and everybody goes to Canada,” Springfield Mayor Michael Albano told Morley Safer of NBC-TV. (“60 Minutes,” Aug. 22, 2004) The mayor said this would keep Springfield from having to lay off essential workers in a budget crunch.

But when the state of Vermont in the summer of 2004 tried to import prescription drugs for its residents, the Food and Drug Administration barred the way. The state announced it would go to court.

Locking people into high-priced medicines

Now the drug plan part of the Medicare reform act is about to go into effect. It will lock seniors and the disabled into plans based on the extortionate prices charged here by the drug companies. And under this act, the federal government is specifically prohibited from negotiating with drug companies to lower their prices.

In November 2005, according to the Social Security Administration, the average monthly check for all types of beneficiaries—retirees, their survivors and the disabled—was $879. Seniors covered by Medicare Part B would pay a $78 premium, leaving them $801, or about $9,600 per year.

If they choose a Medicare drug plan, they will pay an additional $35 a month premium—reducing their Social Security check to $766, or $9,192 a year. There is a deductible of $250 before the plan kicks in. After that, they pay 25 percent of all covered drug expenses up to $2,250.

But what drugs are covered? It all depends on each individual private plan in each area. So does the price of the drugs. That’s why it’s so hard to know what all this will really cost each person out-of-pocket.

Let’s assume that someone receiving the average yearly Social Security payout—$9,192—is lucky enough to get a drug plan that covers the medicines they need, and that the total cost for the year comes to $2,250. They pay $250 for the deductible plus $500 (25 percent of the next $2,000), leaving them with a yearly income of $8,442.

But what if their drugs cost more than that? It’s not uncommon for someone with a heart condition or some other chronic ailment to spend $300 a month on drugs these days.

Here’s where the infamous “donut hole” comes in. With the next $1,350 worth of medicines required, the Medicare drug plan covers—nothing! Zip.

The plan is supposed to provide assistance for very low-income people. But they can’t have more than a few thousand dollars in assets. By the end of November, only one in nine of the 5.7 million low-income seniors not covered by Medicaid had been approved for assistance.

So it’s obvious that the average person on Social Security who requires a significant amount of medications will not be able to survive on this drug plan, unless they have substantial other income.

It will do nothing to lift anyone out of poverty—it may even help put them there.

The lawmakers from both big capitalist parties voted this act into existence under the pressure of the pharmaceuticals. Even the organization that supposedly lobbies in the interests of the elderly—the American Association of Retired Persons (AARP)—capitulated to the pressure and endorsed it. It is now in the business of selling drug coverage to its members—the AARP MedicareRX Plan.

Paying more and dying quicker

People in the U.S. now pay way more for health care than in any other country in the world, but our health statistics are far down the list.

In its World Health Report for 2000, the World Health Organization ranked the U.S. health system 37th in the world—worse than those of much poorer, smaller countries like Malta, Cyprus, Dominica and Costa Rica. In life expectancy, the U.S. was 53rd out of 219 countries.

These are shocking figures for a country that has for years been on the cutting edge of technology. But they also reflect political priorities: the U.S. spends as much on its military as the rest of the world combined.

They also reflect the great inequality in this country, where tens of millions of people are subject to racial and national oppression and discrimination that degrades their health in a thousand different ways.

The problem is not general underdevelopment. It is not a lack of resources. It is capitalism taken to its extremes, driven in every area of life by nothing but the profit motive and with few restraints coming from a government that has been thoroughly housebroken by the big moneyed interests.

Interns, medical students and other health care workers recently demonstrated in New York for a national health care system, free and available to all. This is a sea change for these professionals. Every progressive and working class organi zation must put the demand for socialized medicine on its agenda.

Health care is a right, not a privilege. It must be totally restructured to remove the profit motive from every level of health care while making quality preventive as well as curative medicine available to everyone.