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Privatizing Medicare? A Debate on the Controversial Medicare Drug Bill

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The Senate overcame two blocks to a massive Medicare overhaul to provide prescription drug coverage to seniors which introduces competition with private healthcare plans. We host a debate with the Mass. Senior Action Council and the AARP and we take a look at who will receive tax benefits from the bill.

A controversial Medicare bill made it past two attempted Democratic blocks in the Senate yesterday and is expected to win final passage in the biggest changes to the program since its creation in 1965.

The Senate broke a filibuster against the Medicare bill led by Democratic Senator Edward Kennedy. Then, on a close vote, the Senate defeated a budget challenge to the measure. The House approved the Medicare bill on Saturday, by a vote of 220 to 215, after an all-night session that ended with a record three-hour roll call. House Democrats accused the Republican leadership of abusing the rules of Congress by refusing to close the vote.

The massive Medicare $400 billion overhaul provides limited drug coverage and also includes plans for making generic drugs more readily available, making seniors who earn more than $80,000 pay more for doctors visits and introduces competition with private plans. Critics say the bill would privatize Medicare — the federal health insurance program for 40 million people. The Washington Post notes that the $400 billion figure underestimates the long-term costs of the measure which could be as high as $2 trillion.

The bill bans federal officials from using the purchasing power of the Medicare program to negotiate lower drug prices. It also omits plans to make it easy for American consumers to reimport U.S.-manufactured drugs from Canada and other Western countries where the medicines are less expensive.

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This is a rush transcript. Copy may not be in its final form.

AMY GOODMAN: Here to debate the bill, are two people: John Rother, Director of Policy and Strategy for the AARP–American Association of Retired Persons, and Isaac Benezra, President of the Massachusetts Senior Action Council.

John Rother, why have you supported this bill? Why is AARP backing it and running the $7 million ad campaign in support of it?

JOHN ROTHER: The main reason is it would be good for seniors, especially those who are most in need: lower income Seniors and those are with the highest drug costs. It also substantially strengthens retiree coverage offered by employers so that that will be more stable. And finally, we feel this is not a threat to Medicare’s future, but that there are careful protections in here that would allow more private plans into the program, but at the same time not undermine the traditional Medicare program, which is going to be needed as most people prefer that, going forward. So, it’s $400 billion to help seniors.

AMY GOODMAN: Isaac Benezra?

ISAAC BENEZRA: Good Morning.

AMY GOODMAN: It’s good to have you with us. Your response.

ISAAC BENEZRA: My response. Well, I think the best way to start is to just read the opening paragraph of the Boston Globe” lead editorial on November 20th. It’s titled, “A Poison Pill for Medicare.” And it reads, “Older Americans deserve a Medicare drug benefit, but not at the expense of the integrity of the program. Congress should reject the work of the Republican-dominated conference committee and wait for a better time to pass legislation that focuses on reducing the high costs of prescription drugs. It was bad enough that the version passed by the Senate this summer mandated that the drug benefit be administered by private prescription management companies. These firms do obtain discounts from drug manufacturers, but they lack the buying power of the federal government to get the lowest prices.”

I’m the president of an organization of only 2,500 seniors in Massachusetts, and we have to say to Mr. Rother, we are really disturbed that our premiums and our membership fees were used to do a $7 million blitz to put a cover for the Bush administration in the election of 2004, and we will sit down with you any time to talk about the so-called benefits.

AMY GOODMAN: Let me ask this question of John Rother. The Wall Street Journal ran a piece last week talking about the tremendous dissatisfaction among the AARP membership saying that Democrats are calling it now the American Association of the Republican Party, vilifying the head of the AARP, William Novelli, as a long-time closet Republican who forfeited his leverage and cut a lousy deal. The AFL-CIO poll shows that 18% want Congress to pass the Medicare bill. Mr. Novelli himself said there’s something like 1,500 calls a day–maybe they have gone up since–mainly negative. What does it mean that AARP is a membership organization?

JOHN ROTHER: Well, it means two things. Number one, we try to act in the best interests of all of our members. And, of course, we have 35.5 million members. It’s quite a diverse population, including many low income seniors. And secondly, we bend over backwards to make sure that we listen to our own members. To do that, we have a very aggressive program of polling and focus group work. As you mention, we have telephone lines, we have emails, lots of different ways of staying in touch with members. The most recent polling that we did after the bill was described to people, about 75% of AARP members said they wanted this bill enacted. So, I think what we’re getting in the public arena is people understandably reacting to whatever they have been told about the bill. It’s a complicated bill. I don’t blame it–that people don’t understand it all. Nonetheless, I think when people have a description of the bill, its pros and its cons, we find a majority of support for going forward, even though it’s certainly not perfect.

AMY GOODMAN: Isaac benezra. It’s just that it’s not public?

ISAAC BENEZRA: I take exception to the numbers that were given. I met with 100 seniors in Greenfield, Massachusetts, on Friday -100 AARP members. And they never got a call asking them how they felt about this bill.

So, let’s start describing the bill.

Number one, it replaces traditional Medicare with a medical voucher in 2010. That means in 2010 we no longer will have the option to continue in traditional Medicare. If we do, it will be at the expense of higher premiums because you will be a part of the mechanism that has allowed this country to go the route of privatizing Medicare. Now, it’s pretty clear to us that if we have to go to an HMO or to an insurance company with a medical voucher, we will be looking at the same scenario we have been looking at for years. And that is depending on an insurance company that’s willing to accept seniors.

Apparently this bill, in order to make it more palatable for the insurance industry, is going to subsidize not seniors, but subsidize the insurance industry.

Now, if we want to improve Medicare, and I think AARP has always taken a position for wanting to improve Medicare, and if it’s good for seniors, why aren’t we moving in the direction of expanding Medicare? We pay over 50% of the Medicare costs out of pocket now. We have to buy a Medigap policy in order to cover the uncovered parts. We don’t have any long term care. We don’t have a decent prescription benefit plan. Why aren’t we talking about strengthening Medicare, and why aren’t we talking about the 41 million Americans who have no insurance? One of the targets for this legislation is to undermine the only single-payer system that we have in America, and that’s the Medicare system. I think the decision to go this route is to undermine our opportunity to expand Medicare for our children and grandchildren. So, Mr. Rother, when you say 75% of the people have been polled, why don’t you do a write-in poll and give us all an opportunity to vote how we feel on this? I’ll have more to say in the next few minutes.

AMY GOODMAN: Let me bring in Frank Clemente, Director of Public Citizens Congress Watch, which has just launched a new website called “” that tracks the influence of private money in president Bush’s re-election campaign. As we talk about the AARP and its–to many–surprise support for this Medicare bill, what is the money that we are talking about here, Frank Clemente?

FRANK CLEMENTE: In the Medicare debate, you have very large number of interests. You have the hospitals, you have the HMO’s and managed care companies, you have, of course, the drug industry, you have the doctors who want higher payments which are included in this Medicare bill.

The HMO’s and managed care companies, what they care about, they actually will operate the insurance — private insurance plans through which the Medicare drug benefit will be delivered.

You have the hospitals who are getting very large increase in payments under the Medicare bill. And then, of course, you have got the drug companies which at all costs, what they were trying to avoid in this Medicare bill was the government having the power, the authority, to negotiate lower prices. They also fought as hard as they could, and won, to prevent the government from allowing folks to import drugs from Canada where, as we know, drugs are about half the price as they are here in the United States.

Very powerful interest groups have been operating in this fight, many of them are what we call invested into President Bush’s re-election campaign. They are people… The head of the Federation of American Hospitals for instance, Chip Kahn, who’s pledged to raise–or who has already raised $100,000–these come in $2,000 chunks from individual donors. He got at least 50 people from his hospital association to give him $2,000 checks which went to President Bush. The President, his re-election campaign has a tracking system. They actually assign numbers to different donors or to different–what we call bundlers–people who are collecting these donations. The folks, whom they get the checks from: the different individual hospital C.E.O.’s or the drug company officials, they write the tracking number for that person who is the bundler for that particular industry so that that industry or that major corporation can get credit with the Bush Administration in its re-election campaign.

ISAAC BENEZRA: Amy, could I interject?

AMY GOODMAN: Yes. Go ahead.

ISAAC BENEZRA: I’m a retired 77-year-old senior, and let me tell you what this means for us. Let’s take one issue, the curtailing of prescription drugs from Canada. We’re already dealing with curtailing. Six of the largest pharmaceutical companies in the world have sanctioned Canadian pharmacies that are doing business with American consumers–with the support of the Bush Administration. So, we have–we have — that’s the first battlefield we’re facing.

The other one, in regard to drugs, is the Bush Administration is trying to prevent us from getting our drugs from Canada. So, it’s a two-way battle that we’re fighting. Our own government is making it almost — very difficult to get drugs from Canada. Now, what does this mean for my family? My wife and I save $2,576 a year by going to Canada for our drugs via the internet. That’s half our total drug bill in 2003. Why is our government trying to prevent us from getting lower priced drugs and supporting the pharmaceutical industry’s attempt to monopolize and control where consumers can buy drugs?

That’s number one. This bill curtails prescriptions from Canada. I’m really disappointed that Mr. Rother has not talked about that.

JOHN ROTHER: I’d like to, actually.

ISAAC BENEZRA: I hope you would.

JOHN ROTHER: And the first point I want to make is that we do support-

AMY GOODMAN: John Rother of the AARP.

JOHN ROTHER: We do support and have loudly supported broader reimportation from Canada. We were quite disappointed that the bill makes no change in current law. So, people who are buying for personal use from Canada can continue to do so.

ISAAC BENEZRA: Mr. Rother, you said this is good for seniors.

JOHN ROTHER: And we have advocated for a broader redistribution and broader opening of the borders from Canada for prescription drug imports. Second point I’d like to make is that we’re strictly non-partisan organization. So, while I agree with Frank’s points about the improper use of campaign donations, AARP makes no political judgments, does not endorse Candidates, does not contribute money. So, we made this call this time around just on the merits of the bill.

AMY GOODMAN: What about the issue of the AARP receiving possibly more than $123 million in royalties from insurance companies last year marketing AARP approved health and life insurance policies?

JOHN ROTHER: Well, of course, we have always tried to get the best deal for our members in the private market in a variety of ways. One is certainly through Medigap insurers. We do have competition, and we selected what we felt were the best Medigap plans for our seniors. I think many objective outside observers have validated that. But what’s not been very widely reported is that we stand to lose revenues as a result of enactment of this bill because three of those ten policies contain prescription drug benefits that we will no longer offer as this bill goes into effect.

AMY GOODMAN: Frank Clemente of Congress Watch. Your response on this point?

FRANK CLEMENTE: I have heard AARP and John talk about this. What I don’t understand is the way this bill is structured. Insurance companies… They have a royalty arrangement with the United Health Group, which is the largest or second largest insurer in the country. It has these Medigap policies that AARP sells. These are policies to bridge the gap to provide outpatient prescription drug insurance coverage. They are expensive policies, and the benefits are not that good, which is why part of AARP has been pushing to have a Medicare benefit for these programs. The United Health Care Group runs — will, I presume, John, will offer drug-only insurance policies under this new Medicare bill, starting in 2006.

JOHN ROTHER: I’m sorry, I — we do not presume that, because I think — well, we cannot say what they’re going to do but we’re very skeptical about that, and I doubt very much that we would participate in that kind of an offering.

FRANK CLEMENTE: Well, they’re in the business of doing it now, and it will probably be — there will be many more incentives to do it under the new legislation, they will go into this business in a large way. They will also continue to run their — this legislation really encourages people to go into managed care plans to get and use this drug coverage as the enticement to get them into managed care plans. All of these products, many more of these products will be offered and there will be many more incentives for people to to join the products under the new bill. Now, if you are saying that AARP is not going to have a financial incentive to continue that arrangement, I’m very surprised about that, given that a quarter of your revenues comes from these types of arrangements.

JOHN ROTHER: Well, we have always supported expanding Medicare, even when that would cut revenues to the association. We did that in the catastrophic bill. We did that under Clinton’s health reform proposal, and we’re doing it now. So, I think that, you know, the test here is what’s going to work best for seniors.

AMY GOODMAN: Isaac Benezra, last ten seconds.

ISAAC BENEZRA: How does the bill that prohibits Medicare from negotiating lower prices with the pharmaceuticals help seniors?

AMY GOODMAN: On that note, we have to leave it there. Isaac Benezra, President of the Massachusetts Senior Action Council, John Rother of AARP, and Frank Clemente of Congress Watch.

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