Friday, May 26, 2006

Social Security and Medicare D


For weeks, I've been mulling over the profound differences in approach to government-provided insurance between the Social Security Act of 1935 and Medicare D, the program to provide prescription drug coverage to seniors which passed in 2003 and went into effect this spring, with it's enrollment deadline occurring only a few days ago. Why these striking differences? Is Medicare D a case of learning lessons from the evident failures and shortcomings of an obsolescent program passed seventy years ago and correcting them? Or, on the other hand, does Medicare D represent a reckless disregard for the bases for Social Security's stunning success, a willful repudiation of the tried-and-true? Should the Bush administration have consulted the New Deal "brains trust" in formulating its prescription drug program, or might FDR, Frances Perkins, Harry Hopkins, and Henry Mogenthau have benefited from the counsel of modern-day policy analysts at the American Enterprise Institute and the Heritage Foundation, and produced something significantly better than Social Security, conceded even by its admirers, then and now, to have its very real flaws?

Let's begin by placing Social Security in its most favorable light. At a stroke, it provided unemployment compensation, old-age insurance, and aid to families with dependent children, among other things. As glowingly described by Arthur Schlesinger Jr. in his classic The Coming of the New Deal,

"Facing an administrative challenge of staggering complexity, [Social Security] operated with steady intelligence and competence. No New Deal agency solved such bewildering problems with such self-effacing smoothness. The old-age insurance program went into quick effect... No government bureau ever directly touched the lives of so many millions of Americans---the old, the jobless, the sick, the needy, the blind, the mothers, the children---with so little confusion or complaint. And the overhead costs for this far-flung and extraordinary operation were considerably less than those of private insurance."

This estimate, of course, ignores what we nowadays call "the downside" of social security, of which more toward the end of this essay, but it is on the whole a just assessment, and we cannot but note the comparatively unfavorable light in which it seems to place the Bush drug prescription program. Medicare D is much more complex than Social Security because of the public sector-private sector collaboration upon which it is based. Why, critics ask, not make the whole thing single-payer and leave the insurance industry out of it, just as it is left out of Medicare itself? Why not make the administration of the program entirely in-house? Why not give Medicare the power to negotiate the terms of drug purchases directly with Big Pharma?

These are all good questions, and they deserve persuasive answers. At first glance, and even at second, it must be said, the Bush approach seems to carry with it severe disadvantages. It seems, to put it bluntly, to be no more than a giveaway program for the insurance industry, a program by which industry profits are needlessly subsidized by the government, and hence by the the taxpayer, and a program, too, through which enormous profits are simply guaranteed to the pharmaceutical industry for the lifetime of Medicare D.

Isn't it the case, critics ask, that every dollar of profit realized by the insurance industry, its managers and shareholders, represents one dollar less available to the beneficiaries in drugs? Then, too, we must reflect that with as many as eighty insurers offering 1,400 plans competing for sign-ups (the current estimate), a good many of them are bound to fail, for, after all, one purpose of free market competition, and its certain result, is the ruthless weeding out of the less fit. Beyond that, there is the inevitability of fraud, for the temptation to cut corners and line pockets can never be completely suppressed in the best regulated of markets. Realistically, the overhead costs must be immense. The regulatory bureaucracy in Medicare, Health and Human Services, and the Justice Department--the paperwork examiners, auditors, and attorneys--will run into the many thousands if there is to be any chance of maintaining even rudimentary standards of honesty and competence.

What possible benefit, it will be asked, can justify the risks and hazards outlined above? And how can seniors possibly make any sense of the myriad plans proferred them, as many as forty in each state, with differing and sliding monthly fees, co-pays, deductibles, and pharmacopoeias? President Bush faced these issues squarely recently and gave his blunt response: "We have changed Medicare for the better," he said, "but sometimes change creates anxieties. The more choices you have, the more likely it is you'd be able to find a program that suits your specific needs. In other words, one size fits all is not a consumer-friendly program."

There you have it. Choice. It is, as one might say, the First Amendment of the Consumer's Bill of Rights. It is the American way. I recently visited a supermarket and wandered into the oral hygiene aisle, and there on the shelves I counted thirty different brands, flavors, and sizes of mouthwash! This gloriously varying array of products jostling one another for my dollar raised this question in my mind: would any of us really want a world in which we all had to buy Listerine?

This brings us to the notorious "doughnut," or more precisely the doughnut hole, the gap in coverage between the first $2250 and $5100 of drug purchases. What could have possessed Congress to do this, many wonder. The doughnut metaphor is particularly apt, suggesting as it does that the missing portion consists of nothing but empty calories, trans fats, and sugar. Just as the Bush plan offers consumer choice, so it promotes personal responsibility. As she gobbles her way through six or seven generics a day and closes in on that $2250 deadline, the patient must stop and ask herself, "Do I really need 7 and a half milligrams a day of Coumedin, or could I get by on five? Is this Cipro really necessary? Do I have to take all this Ditropan, or might I produce the same results with a change of diet?" She must, in other words, face the fact that in this world there is no such thing as a completely free lunch. It's a timely lesson, even--or perhaps especially--for the over-65s.

As to the profits assured to Big Pharma by Congress's act of forbidding Medicare to negotiate drug prices, which some darkly attribute to the pharmaceutical industry's "clout" in Washington, well, here the story is more complex than some newspaper columnists would have you believe. For one thing, while Medicare may not bargain with the pharmaceutical giants, the insurers are perfectly free to seek whatever discounts they're able to pry loose from the drug companies, and I, for one, wish them all the luck in the world, although, realistically, the heavy hitters like UnitedHealth, Humana, WellPoint, and Blue Cross/ Blue Shield are bound to have better luck here than the small fry.

But the underlying issue is this: are those 18 to 20% profit margins enjoyed by the pharmaceutical giants really "exorbitant," as some critics charge? It is often pointed out that most industries reap far less in profits. Car manufacturers, for example, settle for 5%, when they make any profits at all. But this is to ignore the billions that Pfizer, Eli Lilly, Merck and the rest have poured into research over the last quarter century or so to produce the cornucopia of drugs which have extended and enhanced our lives. Critics allege that the Bush plan puts the drug industry first, the insurers a close second, and the beneficiaries a distant third, but the truth is that in assuring steady high profits for the drug giants, it also assures better health for all of us.

In the U.K. they think otherwise. There, Parliament imposed ceilings on pharmaceuticals' profits, and you may be sure they are far below 18%. What has been the result? That the Brits are a whole lot sicker than we Yanks, in spite of whatever junk science propaganda you may have heard to the contrary from the likes of the New England Journal of Medicine, The Lancet, or Paul Krugman.

Drug industry breakthroughs in treatment are occuring all the time. Just recently, research by three companies--Merck, Novartis, and Sankyo--established that 57 million more Americans than we had supposed are at risk from high blood pressure. The New York Times reports (Saturday, May 20) that the three spent $700,000 to "wine and dine doctors last year at steakhouses around the country and brief them on the latest news about high blood pressure." A few disgruntled physicians sharply protested this expanded definition of high blood pressure and accused the drug industry of wanting only to "increase the number of persons taking drugs." One recklessly charged that the medical profession was as addicted to drug industry money as Americans are to oil. But the real news here is surely that if not for this industry "heads up," many millions of Americans might have died in their sleep from high blood pressure without even knowing they had it!

Research is not the only drain on drug industry profits. Advertising costs in this highly competitive industry are also very substantial, and were greatly increased when Congress in 1997 for some reason passed and Bill Clinton signed into law a bill permitting the advertising of prescription drugs on television. The salvo of commercials began with Pfizer's introduction of its new anti-arthritic drug Celebrex, and the jingle "Celebrex, Celebrex, come on and celebrate!" quickly became inescapable. The promotion produced at least one indisputable if unintended public good: overnight, the network evening news shows were turned from loss leaders into sources of high profits. Merck soon responded to Pfizer by promoting its own anti-arthritic miracle drug, Vioxx, with the lovely ice-skating champion Dorothy Hamill, thirty years on from her Olympic gold medal but seemingly ageless, thanks to Vioxx, gliding across a pond trailing children to the accompaniment of a reggae-beat "It's a beautiful...MORNING!..."

One oddity of such commercials is that they promoted the announcing careers of fast speakers--those able to read their way through the required warnings with astonishing speed:

genitalsorenessandmildintermittentsphincterspasms. Donotuseifpregnant."

OK, it turned out that all those millions who were prescribed Vioxx would have been a lot better off taking aspirin, but who knew? Not the FDA. Although the aesthetics of these commercials are sometimes pleasant, their clear purpose is to educate and inform, which is why they always end with "Ask your doctor if X is right for you." Sarcastic spirits interpret this to mean "pester your doctor to prescribe X and don't take no for an answer." But really this is quite unnecessary because your doctor or a colleague in the same practice very likely was flown last year to an all-expenses-paid seminar at a thirty-six hole championship class golfing resort on Maui where he learned of the wondrous results achieved by X in five years of exhaustive testing.

In summary, what might the drafters of Social Security have learned if they'd had the privilege of consulting Bush plan advisers? First, choice. It somehow mattered not to FDR's inner circle whether the recipients of Social Security were single or married or were homeowners or renters. They all got the same check. Uncle Sam knew best. Social Security thus clearly failed the Bush litmus test: "One size fits all is not a consumer-friendly program." Second, no requiring of responsibility. If there'd been a doughnut, if, for example, Social Security checks had only arrived nine months of the year rather than in all twelve, it would have been brought home to recipients that they were damned lucky to get anything, and for part of the year would be on their own. Third, Social Security cut out altogether the hard-hit private insurance industry. If recipients had received their checks from Mutual of Omaha, Metropolitan Life, Fireman's Fund, etc., business confidence might have recovered far faster than it did, promoting a more speedy prosperity for all Americans.

Yes, Social Security flourished---in the short run (well, for seventy-plus years). But we have been warned by our president. After winning re-election in 2004, he memorably said, "I've earned capital in this election--political capital--and now I intend to spend it. That's my style." And he spent it telling us that Social Security would be bankrupt by 2018 and that even now all the guarantees of future payments stored in some filing cabinet in Erie, Pennsylvania, were nothing more than a collection of worthless IOUs. We ignored him, and continue to ignore him, at our peril.