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President’s State of the Union offers “bad medicine” for Medicare, malpractice

Tuesday, January 28, 2003

President’s State of the Union offers “bad medicine” for Medicare, malpractice

WASHINGTON, DC — As President Bush prepares to deliver his State of the Union address tonight, the national consumer organization Consumers Union is questioning the President’s plans for Medicare and medical malpractice.
The Bush administration is reportedly considering a proposal that would require Medicare beneficiaries to join some type of government-subsidized private health insurance plan to obtain coverage of prescription drugs. The plans would include health maintenance organizations (HMOs) and loose networks of doctors and hospitals known as “preferred provider organizations.”
Consumers Union believes that this proposal would be bad medicine for the Medicare program. It would force Medicare beneficiaries to sacrifice freedom of choice of doctor in order to get prescription drug benefits. It provides no guarantees that seniors or the disabled would have access to an affordable prescription drug benefit, but it does guarantee that the federal government would lose an important opportunity to negotiate lower prices for prescriptions for the elderly and disabled.
The proposal would provide about $390,000 to fund the so-called reforms. An undetermined amount would be used for reforms besides the inadequate drug benefit. Even if all the money were allocated to paying for prescription drugs, it would cover less than one quarter of projected prescription drug costs for this population.
What will Medicare beneficiaries encounter if this plan goes into effect? Those in rural areas may have no access at all to new prescription drug benefits. Those who are lured into “preferred provider plans” may face unaffordable new cost-sharing if they stray outside of the list of providers offered by the plan. Over time the voluntary nature of the program will likely lead to higher prices each year, making coverage more difficult to afford. Seniors and the disabled will be subject to an ever-changing array of choices and premiums, and will be unable to count on continuity of coverage or continuity of doctor care, as HMOs and insurance companies come in and out of the program.
Instead of proposing these measures, the President should support a comprehensive Medicare drug benefit, available to all beneficiaries whether they live in the city or a rural area, whether they enroll in managed care or traditional Medicare. This drug benefit must put the full negotiating power of the federal government to work in negotiating discounts for beneficiaries.
Furthermore, the President is expected to call for a controversial plan to limit the legal damages awarded to patients in medical malpractice cases. Putting caps on such damages will not solve the problem of rising malpractice insurance rates. Such limits are not only ineffective; they are unfair to the patients who are injured and to the families of those who die because of grossly negligent behavior by healthcare providers. There is no guarantee that this plan will lower rates. It does nothing to enhance patient safety or reduce medical errors, and it puts an unfair burden on innocent victims of malpractice.
Every ten years or so, we hear about a medical malpractice insurance “crisis,” eventually followed by an evening out and lowering of medical malpractice insurance rates. The reason is that insurance companies rely on both premiums and investment earnings to pay claims. When the stock market is doing well, insurance companies often lower premiums to the point where they are unprofitable, simply because they can invest those premium dollars in the market and make money. When the stock market falls, as it has in the last two years, premiums go up.
Rather than support this proposal, Congress should help doctors by forcing insurers to better manage malpractice premiums, spread risk among doctors for the high cost of insuring high risk specialties, and force insurance companies to make public their insurance practices. Congress should look at repealing the insurance industry’s special exemption from antitrust suits and consider creative ideas such as the possibility of a fair and equitable no-fault system for malpractice victims.
For more information contact: David Butler, 202-462-6262