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Will Democrats rescue Medicare? Will reporters even pay attention?

ASK THIS | January 30, 2007

Republicans under Gingrich began crippling Medicare, and Bill Clinton went along with it. Things have gotten a lot worse under Bush.

Q. While many congressional correspondents and others covering Medicare weren’t looking, the Republican Congress and Presidents Clinton and Bush have seriously damaged the Medicare program. Can it be rescued?

By Saul Friedman

This is for congressional correspondents and others covering efforts in the new Democratic Congress to require Medicare to negotiate for the best possible prices on drugs: Go beyond that issue to see what’s happened to Medicare while not enough of you were looking.

First a bit of history for most of you who were too young when Medicare became law in July, 1965. It was an idea that was a long time in coming, but as complex as the law was, Lyndon Johnson signed it at Harry Truman’s home in Independence, Mo., just four months after it came out of the House Ways and Means Committee. Most Republicans (including then congressmen Gerald R. Ford and Donald Rumsfeld) opposed it.

Medicare, which was to provide health insurance for persons over 65 (and later the disabled) was the product of compromise; doctors, labs and hospitals were not to be run by the government and private firms were hired to administer the program in each state. But the most salient and important principle was Medicare’s universality. It was available at the same prices with the same benefits for all participants, no matter their income. For those of you who know about risk pools, that is what made Medicare work for 42 years and become, according to every poll I’ve seen, the most nation’s most popular health insurance plan.

The erosion of Medicare began with the 1995 Republican congress, whose leaders (Newt Gingrich and Richard Armey) opposed Medicare just as their political forebears did, on the grounds that government should not be in the health insurance business—the very principle that made the program work.

With President Clinton’s agreement, Medicare was opened to private insurers who were helped along by generous federal subsidies. Clinton caved in after a bruising, losing battle for his health care bill and because he just was not committed to the principle of universality.

In any case, the Medicare HMOs pulled out eventually because they couldn’t earn sufficient profits insuring people who, as they got older, were more likely to need more expensive and frequent medical care. But the HMOs have gotten a fresh lease on taking control of Medicare with the presidency of George Bush, whose platform, in part, called the program a “dinosaur” that needed “modernization.” For “modernization,” read “privatization.”

Republicans were appointed, not to defend Medicare, but to go along with its erosion. Yearly cuts in Medicare’s benefits, smaller fees for physicians and other providers, and the increases in premiums and new, larger subsidies for private insurers nibbled away at Medicare’s strength. An insidious statute that required premiums to account for 15 percent of Medicare’s Part B budget locked Medicare into ever higher premiums.

But (and I’m getting to my point) the most lasting damage came in the Part D drug benefit of December, 2003, passed in the middle of the night after Democrats were literally shut out of the committee process. The so-called Medicare “modernization” bill was designed to put Medicare on the road to permanent privatization.

First, the government was to have no role in supervising the Part D benefit; that was left to the insurance and drug companies that helped write the legislation. And second, as I’ve reported earlier in a Watchdog blog, for higher income beneficiaries the premiums for Part B, which is voluntary and pays for doctors, will be considerably higher. That is to say, means testing will come to Medicare for the first time. The Social Security Administration estimates Medicare will lose 50,000 of the most affluent beneficiaries—a small sign of the end of universality and the erosion of the risk pool.

The issues go beyond the proposed legislation aimed at requiring Medicare to negotiate for lower drug prices. On its face, such a change seems like a simple adjustment to the 2003 bill but it’s not working out that way. Speaker Pelosi and Senate Majority leader Reid are having a hard time coming up with a bill, and whatever language they end up with probably won’t accomplish what they hope it will.

Given that situation, how and when will Democratic leaders begin to roll back the damage that has been done to the principles of original Medicare? Everyone, even Republicans, are talking about universal health care, but Medicare—the only such program the nation has—has been crippled.

I have not seen any in-depth examinations of what has happened. I wonder how much the press cares about the issue of social insurance. Reporters ought to care because they have a personal stake in it. For one thing, after Iraq, Medicare is a top issue among voters. For another, many employers don't provide health insurance any more, especially after retirement.

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