Boon or bane?Medicare, Part D was, of course, a terrible policy enacted by the Bush Administration that will be INCREDIBLY costly going forward. And of course, the predictable result of this big-spending plan has been a marked increase in the prices of drugs covered by Medicare, Part D, as well as in the premiums of drug-covering plans. And don't worry that this policy will likely lead to giving the government price-setting power in the drug market, which will have disastrous consequences for R&D spending and, based on experience in Europe, a massive delay in the timing of new product launches. But no matter, because Karl Rove got his wish: a wipe-out win over Kerry in the 60+ age demographic in 2004.
Jan 24th 2008 | NEW YORK
From The Economist print edition
Medicare spending is soaring, but could that ultimately harm the elderly?
WHEN George Bush signed a controversial bill that reformed Medicare, the government health plan for the elderly, into law back in 2003 he declared it would be “the greatest advance in health-care coverage for America's seniors since the founding of Medicare.” The reform's central provision, known as Part D, subsidises the supply of prescription drugs by private insurers. Critics mocked the chaotic launch of that scheme, and feared its huge cost would end up wrecking the budget.
So who got it right? At first blush, it would seem that Mr Bush did. Despite those teething pains, the Part D plan has taken off in earnest. Many millions have signed up, and private insurers have flocked to the scheme. Polls show the plan is popular. But look closer and the plan's warts appear. For one thing, as predicted, it is hugely costly. The official Centres for Medicare and Medicaid Services recently estimated that while overall health spending grew only 6.7% in 2006 to $2.1 trillion, about the same rate of increase as in 2005, Medicare spending shot up 18.7%—double the rise a year earlier and the fastest since 1981. That could well affect the elderly in coming years by forcing the government to make cuts elsewhere.
Mindful that recession may be coming, Democrats are now trying to boost spending on Medicaid, the government health scheme for the poor, by tacking on provisions to the big economic stimulus package wending its way through Congress. Bush administration officials have made clear they will not allow cuts in Part D, as some Democrats propose, so how to pay for this is unclear. What is clear is that costs are already squeezing Medicare, as a big row over doctors' pay reveals.
Doctors and hospitals already had a disincentive to take on Medicare patients, as cost-cutting laws enacted by Congress years ago were anyway hurting their margins. But in late December, Congress went further, and very nearly enacted a mandatory 10% cut in doctors' reimbursements for Medicare patients. In the end, doctors got a six-month reprieve; efforts are now under way in the Senate to extend that reprieve for a further two years. If such cuts go through, most doctors will think again about treating Medicare patients.
Mr Bush's Medicare reforms are popular today, but a backlash may be coming. Some private firms have been caught manipulating the elderly into signing up for inappropriate plans. Questions are being asked about why the public is subsidising the marketing expenses of pharmaceutical companies—expenses that the public sector does not incur. Those doubts will turn into howls if Part D puts the rest of Medicare under the scalpel.
However, I find it ironic that, as the article points out, the very people it was sold to are likely the people who will be directly hurt by it. Slashing reimbursement to physicians for treating Medicare patients will lead to a huge decline in care for Medicare patients. This will inevitably lead to calls from Democrats who are seeking a nationalized health care system with all of its vices to institute regulations forcing physicians to treat Medicare patients with the decline in reimbursement.
So much for small government.
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