[Mb-civic] Krugman

[Mike Blaxill]

http://www.truthout.org/docs_2005/111105K.shtml

The Deadly Doughnut
    By Paul Krugman
    The New York Times

    Friday 11 November 2005

    Registration for Medicare's new prescription
drug benefit starts next week. Soon millions of
Americans will learn that doughnuts are bad for
your health. And if we're lucky, Americans will
also learn a bigger lesson: politicians who don't
believe in a positive role for government
shouldn't be allowed to design new government
programs.

    Before we turn to the larger issue, let's
look at how the Medicare drug benefit will work
over the course of next year.

    At first, the benefit will look like a normal
insurance plan, with a deductible and
co-payments.

    But if your cumulative drug expenses reach
$2,250, a very strange thing will happen: you'll
suddenly be on your own. The Medicare benefit
won't kick in again unless your costs reach
$5,100. This gap in coverage has come to be known
as the "doughnut hole." (Did you think I was
talking about Krispy Kremes?)

    One way to see the bizarre effect of this
hole is to notice that if you are a retiree and
spend $2,000 on drugs next year, Medicare will
cover 66 percent of your expenses. But if you
spend $5,000 - which means that you're much more
likely to need help paying those expenses -
Medicare will cover only 30 percent of your
bills.

    A study in the July/August issue of Health
Affairs points out that this will place many
retirees on a financial "roller coaster."

    People with high drug costs will have
relatively low out-of-pocket expenses for part of
the year - say, until next summer. Then,
suddenly, they'll enter the doughnut hole, and
their personal expenses will soar. And because
the same people tend to have high drug costs year
after year, the roller-coaster ride will repeat
in 2007.

    How will people respond when their
out-of-pocket costs surge? The Health Affairs
article argues, based on experience from H.M.O.
plans with caps on drug benefits, that it's
likely "some beneficiaries will cut back even
essential medications while in the doughnut
hole." In other words, this doughnut will make
some people sick, and for some people it will be
deadly.

    The smart thing to do, for those who could
afford it, would be to buy supplemental insurance
that would cover the doughnut hole. But guess
what: the bill that established the drug benefit
specifically prohibits you from buying insurance
to cover the gap. That's why many retirees who
already have prescription drug insurance are
being advised not to sign up for the Medicare
benefit.

    If all of this makes the drug bill sound like
a disaster, bear in mind that I've touched on
only one of the bill's awful features. There are
many others, like the clause that prohibits
Medicare from using its clout to negotiate lower
drug prices. Why is this bill so bad?

    The probable answer is that the Republican
Congressional leaders who rammed the bill through
in 2003 weren't actually trying to protect
retired Americans against the risk of high drug
expenses. In fact, they're fundamentally hostile
to the idea of social insurance, of public
programs that reduce private risk.

    Their purpose was purely political: to be
able to say that President Bush had honored his
2000 campaign promise to provide prescription
drug coverage by passing a drug bill, any drug
bill.

    Once you recognize that the drug benefit is a
purely political exercise that wasn't supposed to
serve its ostensible purpose, the absurdities in
the program make sense. For example, the bill
offers generous coverage to people with low drug
costs, who have the least need for help, so lots
of people will get small checks in the mail and
think they're being treated well.

    Meanwhile, the people who are actually likely
to need a lot of help paying their drug expenses
were deliberately offered a very poor benefit.
According to a report issued along with the final
version of the bill, people are prohibited from
buying supplemental insurance to cover the
doughnut hole to keep beneficiaries from becoming
"insensitive to costs" - that is, buying too much
medicine because they don't pay the price.

    A more likely motive is that Congressional
leaders didn't want a drug bill that really
worked for middle-class retirees.

    Can the drug bill be fixed? Yes, but not by
current management. It's hard to believe that
either the current Congressional leadership or
the Mayberry Machiavellis in the White House
would do any better on a second pass. We won't
have a drug benefit that works until we have
politicians who want it to work.