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New Law Undermines Medicare

New Law Undermines Medicare

On Dec. 8, President Bush signed into law some of the biggest changes ever made to the Medicare program. While the President hailed the new law as a breakthrough that would give seniors "practical and much-needed help," most senior citizen organizations said it was disastrous for Medicare and a classic example of "bait and switch."

MEDICARE PRIVATIZATION. Supporters have always described the legislation as a Medicare prescription drug benefit (though the coverage is inadequate and the benefit is available only through private insurance), but drug coverage represents only a portion of its content. For many supporters, the real purpose of the legislation has always been the redesign of the entire Medicare program, through the introduction of privatization and vouchers. Measures to accomplish this are just as much a part of the new law as the drug benefit.

"Seniors didn't win much with this legislation," said AFSCME President Gerald W. McEntee. "Instead of saving seniors money, the new law will shift more of Medicare's costs to beneficiaries over time.

DRUG COMPANIES WIN. "The biggest winners are actually the drug companies," he said. "That's because the law bars Medicare from negotiating lower drug prices and stops re-importation from Canada. The drug industry is already the most profitable in the world and it stands to make even more money as a result of this law.

"The insurance companies are also big winners," he said. "The law gives huge federal subsidies to HMOs and begins privatizing the entire Medicare program. Congress has taken a giant step toward handing Medicare to the insurance industry."

That claim was echoed by Robert Berenson of the Urban Institute, who said the government will now pay HMOs 25 percent more, on average, than the amount traditional Medicare pays to cover the same beneficiaries. Clearly, supporters of the law understand that it will take a powerful profit incentive to keep HMOs in the Medicare marketplace.

Also of concern to AFSCME is the law's inadequate subsidy for employers who currently provide drug coverage to their retired workers. Employers, McEntee said, have been struggling with soaring drug costs and many have said they can't continue their retiree coverage without federal help.

LITTLE HELP FOR EMPLOYERS. The employer subsidy provided by the new Medicare law is relatively limited, prompting the Congressional Budget Office (CBO) to predict that over two million retirees will lose their employer benefits as a result. AFSCME fears that some public retirees may be among them, since part of the employer subsidy is in the form of a tax credit, which is of no use to the public sector. Retirees who worked for smaller public employers, such as cities, counties and school districts, may be especially vulnerable.

"How ironic that large numbers of retirees may lose good employer coverage as the direct result of a law that's supposed to help seniors pay for their medicines," McEntee said. He pledged to fight for the benefits of AFSCME retirees, wherever necessary.

SENIORS DON'T LIKE IT. According to George Kourpias, President of the labor-backed Alliance for Retired Americans, "surveys show that the more seniors learn about the new law, the less they like it."

A recent Gallup poll bears that out. Among seniors surveyed, 44 percent to 38 percent opposed the changes to Medicare coverage; 85 percent had some level of concern that the drug benefit won't be sufficient; 78 percent were concerned that the new law enriches drug companies too much; and 73 percent were concerned that some Medicare beneficiaries will be forced into HMOs.

"We have a huge job before us to make sure that seniors know the truth about this law," Kourpias said, "in spite of what will surely be a continuing smoke and mirrors effort by the Bush administration" to promote the law for political gain.

For details of the new Medicare law, see related story

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