Medicare and Manna from Heaven for Corporations

Bad Medicine

excerpted from February 2004 | Harper’s Magazine

by Lewis H. Lapham

In early December last year … President Bush signed the amendment to the Medicare legislation that delivers 40 million elderly and disabled American citizens into the custody of the good-hands people operating the nation’s insurance and pharmaceutical factories. The new authorization purports to reduce the cost of prescription drugs for every needful American, and the White House staff dressed up the photo op in Washington’s Constitution Hail to look like a scene of joyful thanksgiving–a vast throng of well-wishers, military band music, a bright blue banner emblazoned with the physician’s comforting “Rx,” grateful invalids and smiling congresswomen, President Bush in the part of a merry Santa Claus bestowing upon the multitude the gifts of Christmas yet-to-come. Hats off gentlemen, send for the champagne. Great, good news; bread upon the waters; pennies raining from heaven and stars falling on Alabama.

Looked at a little more closely, the scene acquired a somewhat different character and tone. Still celebratory and festive, of course, but the rejoicing of bandits and thieves as opposed to the thankfulness of survivors rescued from a shipwreck. It was hard not to think of Eskimos contemplating the bonanza of a beached whale, the faces in the crowd those of K Street lobbyists eager to congratulate the politicians (chief among them J. Dennis Hastert, speaker of the House of Representatives, and Dr. Bill Frist, the Senate majority leader) who had worked so long and hard to unblock the river of government money now free to water the plains of avarice. It was the genius of Hastert that had formulated the legislation in 681 pages of stupefying prose (and strong-armed the rules of parliamentary procedure in the House to secure the winning vote at 6:00 A.M. on November 22), and it was the calm and morally anesthetized composure of Frist that in the Senate on November 25 had placed the scalpel of extortion against the shaved and naked flesh of the American body politic.

Few or none of the politicians who voted either for or against the bill took the trouble to read it; like them, I rely for my understanding of it on what I’ve seen in the newspapers and what I’ve been told by informed medical practitioners, but I think it safe to assume that the particulars speak to Weicker’s ideal of free-market perfection. The principal author of the legislation, Thomas A. Scully, set about the task of writing it in June of last year, while he was employed as the federal administrator of Medicare. At the same time he expressed the wish to enter the private sector, putting his services up for auction to five high-priced Washington influence brokers representing the insurance companies, the drug manufacturers, and the health-maintenance organizations. Eight days after the happiness in Constitution Hall, Scully resigned his government post to await bids for his tour guide’s knowledge of the small print that allots as little money as possible to individual citizens and as much money as possiblee to the vested commercial interests.

Although the government must provide drugs to 40 million people, it may not negotiate a bulk discount; it must pay whatever price the manufacturer sets or asks–prices that in the recent past have been rising at a rate of 12 percent a year. The legislation forbids the importing of less expensive drugs from Canada, prohibits beneficiaries from buying supplemental insurance for drugs unacknowledged by Medicare, reduces or eliminates payments to as many as 6 million people for whom Medicaid now defrays at least some of their prescription costs, declares a suspension of payment at precisely the point when most people might need the most help. An annual premium of $420 covers 75 percent of drug expenditures up to $2,250; from that point upward the beneficiary must pay, with his or her own money, 100 percent of the next $3,600 in costs; once the expenditures reach a total of $5,850, the government pays 95 percent of the subsequent bill. The actuarial tables assume that relatively few people can afford (or will live long enough) to pay the toll on the bridge across the river of public money flowing out of Washington into the privately owned catch basins of the medical-industrial complex. As a further means of implementing the shift of the nation’s healthcare burden from the public to the private sector, the legislation offers various inducements to the life-enhancing profit motive:

A. A $12 billion slush fund from which, over the next ten years, the secretary of health and human services may pay out bribes to HMOs otherwise reluctant to accept patients whose illnesses cannot be prepped for a quick and certain gain.

B. A windfall of $70 billion, also to be provided over the next ten years, to those corporations willing to continue prescription-drug coverage for their retired employees, the money to be paid in the form of both tax deductions and tax-free subsidies.

C. The guarantee of “maximum flexibility” to the private entities seeking to recruit customers from the general population now served by Medicare. The private entity may exercise the right to “cherry pick”–i.e., to offer its services only to those individuals not likely to require expensive treatment. The government must provide for everybody else, for the hopelessly enfeebled and the terminally indigent.

D. The legislation’s reliance on the drug companies and the private insurers to curtail spending and control costs. The provision serves a dual purpose. It assures the eventual destruction of the entire Medicare apparatus, and it relieves the government of any responsibility for what will be reported as an act of God. Even the dimmest of Republican congressmen knows that the government doesn’t have the $400 billion that the drug-prescription benefit presumably will cost over the next ten years–doesn’t have the cash on hand or anywhere in anybody’s budget projection. The money must be borrowed, at rates of interest yet to be determined. In the meantime, while waiting upon possibly unhappy financial events (wars, revenue shortfalls, stock-market downturns, sustained recession, etc.) the government retains no control of the fees charged by the health plans or the prices that the pharmaceutical companies demand for drugs. Let Mother Nature take her course, and the expenditure estimated at $400 billion easily could become an invoice presented for $1 trillion.

Among all the cheats and false suppositions written into the legislation, the assumption that private entities somehow might be induced to restrain spending should have been the easiest one to ferret out, if by nobody else than by Bill Frist, the Senate majority leader. The good doctor knows, probably better than any of his colleagues in the Senate and certainly as well as Ted Weicker’s exemplary surgeon in long-ago Teheran, how to inflate a drug cost, supply an unnecessary medical procedure, pad a hospital bill. In 1968, Frist’s father and elder brother established the Hospital Corporation of America (HCA), which has since become the nation’s largest consortium of for-profit hospitals and medical centers–252 of them in twenty-three states. For several decades the company required each of its hospitals to return a profit of 20 percent a year and to “upcode” their patients by exaggerating the degree and severity of their illnesses in order to receive, from Medicare, more generous reimbursements for the delivery of imaginary goods and services. So skilled did the hospitals become in the arts of medical chicane that in December 2000 HCA admitted to a defrauding of the federal government so massive that it required the payment of fines in the amount of $840 million. Two years later, confronted with a supplementary set of similar charges, the company negotiated a settlement for an additional $631 million. The agreement was reached on December 18, 2002, two days before Frist was elected Senate majority leader.

Another cautionary tale, but not one supportive of the hope that the cost of the prescription-drug benefit will be contained by the people dispensing it. The corporate health-care systems that currently hold captive 160 million Americans (in return for an annual ransom of $952 billion) can’t afford the luxury of a conscience or a heart. They’re set up to make money, not to care for sick people, and even if the managers sometimes might wish it otherwise, how then would they pay themselves life-enhancing salaries, and what might happen to their faith in the free market? Before investing in private health-care organizations, the Wall Street financial analysts like to see a low “medical-loss ratio” (i.e., that percentage of the yearly revenues actually allotted to patient care) sufficient to offset the administrative costs (9.5 percent in the private sector as opposed to 1.4 percent in the public sector) as well as fund the annual compensations awarded to the chief executives–an average of $15.1 million in 2002 at the country’s eleven leading health-care companies. Even in the best of circumstances the miracle of the free market is never easy to maintain, but over the last few years healthy numbers have become more difficult to find, and if not to their friends in the Congress and the White House to whom else does a good American turn for a little help with the building of a better world?

Two days after the House of Representatives passed the legislation by a vote of 220 to 215, Speaker Hastert’s spokesman named the reward expected in return for so handsome an act of friendship. “This is the thing,” he said, “[Hastert] thinks will keep us in the majority for a while.” Not forever, not after the legislation takes effect in 2006, but at least until next November’s elections, for as long as the specious promise can be promoted as an authentic fact and before too many people open their Christmas presents to find nothing in the box except a card wishing them a happy New Year and hoping that they get well soon.

Proud of its plundering of the American commonwealth on behalf of its corporate sponsors and political accomplices, the Bush Administration follows a practice well established by both its near and distant predecessors. The raids on the federal treasury encouraged by the Reagan Administration took place under the cover of a darkness represented as ideological enlightenment. Deregulation was the watchword for the transfer of wealth from the public to the private sector, the $500 billion savings-and-loan swindle an exemplary proof of what could be done with the theory that big government (by definition wasteful and incompetent) deserved to be sold for scrap to the entrepreneurs in our midst (by definition innovative and efficient) who know how to privatize the profits while socializing the risk and the cost. Wonderful news, said the Wall Street Journal, pennies falling from heaven and stars on Alabama, more swill for the pigs. Diligently applied by a succession of industrious thieves over the last twenty-five years, the theory has resulted in the wreckage of the deregulated airlines, the degradation of the environment, the monopolies strangling the wit and sense out of the news media, the Enron debacle, most recently the Halliburton company’s theft of $61 million (configured as a 100 percent markup on the price of gasoline) from the American army in Iraq.

Thanks to Popi and Tom Natsoulas for forwarding this article. –BL

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