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As Congress casts about to create a prescription drug benefit for Medicare recipients, it is ignoring a successful program already run by the federal government. The Department of Veterans Affairs found a way to buy drugs at substantially reduced costs and make them available to millions of veterans for just $7 a month for each prescription. The VA program compares favorably to congressional legislation that would leave retirees with a huge gap in coverage and cost many of them thousands of dollars each year.
Yet Congress has no intention of copying the VA drug program. That's because the pharmaceutical industry, which makes most of its profits off older Americans, has influenced the outcome of Medicare drug legislation by spending tens of millions of dollars on political campaigns.
Competition and common sense guide the VA program. Its medical staff determines the best drugs available, based on effectiveness and cost, then the department buys in bulk after seeking competitive bids or negotiated prices. In that way, the VA saved $100-million over the prior two years.
So one might think members of Congress, especially those who represent a large number of retirees, would be interested. Not U.S. Rep. Mike Bilirakis, R-Tarpon Springs.
"That's not America," Bilirakis said of the VA program, which he called "a form of price controls."
"Many of my constituents would feel that price controls are a great thing," Bilirakis told the New York Times. "But ultimately some of us have to be responsible."
By "responsible," Bilirakis and other lawmakers mean they want to protect drug companies' profits. In addition to turning the prescription program over to the private sector, the House and Senate bills are filled with sops for special interests. The phone book-sized documents include increased payments to two hospital chains, reimbursement for a Weight Watchers pilot program and inclusion of marriage and family therapists for reimbursement, to name just a few of the perquisites added by members.
In the process, Congress is creating a monster that will be confusing to retirees and likely much more costly that its $400-billion price tag. The legislation in both houses dictates that Medicare cannot "interfere in any way" in seeking drug discounts. And both have a gaping hole in coverage, which would make recipients pay $3,500 or more before catastrophic coverage kicks in.
Congressional hesitancy to control prices in this case is curious. Medicare does so when it sets payment schedules for doctors and hospitals. While there are a few awkward gaps in Medicare's medical coverage, retirees are mostly happy with the program and it has been more effective at holding the line on medical costs than private health insurers.
This outcome for the drug legislation didn't occur by chance. When the pharmaceutical industry realized that a Medicare prescription benefit was gaining political momentum, it spent $20-million in the 2000 election and $26-million in 2002, most of it on behalf of Republican candidates, the New York Times reported. The industry also ran a $60-million ad campaign that favored Republicans, whose market approach would result in much smaller discounts on prescription drugs. "Having both houses of Congress Republican-controlled was great, like in Monopoly when you get to add hotels," one drug lobbyist told the New York Times.
Congress has ignored the example of a successful prescription drug program that operates right under its nose. Now, we know why.