Case Overview, Medicare Prescription Drug Coverage

This document provides background information and summarizes the debate over Medicare Prescription Drug Coverage. The links to the left will lead you to public documents that we have found.

           One of the public's greatest political concerns is the cost of prescription drugs. For those who have good insurance coverage, most of the cost of their pharmaceuticals will be covered. For those without insurance coverage, the cost of the drugs they need to maintain their health can be prohibitive. It is not unusual for an individual's monthly drug bill to be in the hundreds of dollars, a considerable sum of money for those of fixed incomes. For the elderly, their primary insurance is Medicare, the government program created to make sure that the nation's senior citizens receive the medical care they need. Although the program has been expanded over the years to broaden coverage to additional services, it does not cover drugs. The result is that some seniors go without some of the drugs they need, take fewer pills than prescribed by the doctors so as to stretch the medicine out over a longer period of time, or cut back on other expenses (such as food) in ways that diminish their quality of life.
          Every elected official in the United States agrees that this is a serious problem. But the agreement stops there. Instituting a Medicare drug benefit is enormously expensive and alternative approaches must be weighed carefully against the relative costs and benefits. The political difficulties in reaching agreement are enormous. Due to the huge costs of various prescription drugs, there is considerable pressure to restrict the costs of the drugs. Drug companies and their primary trade association, the Pharmaceutical Research and Manufacturing Association (PhRMA) have lobbied vigorously to protect their business by trying to convince policymakers that it is counterproductive for them to force down the price of drugs. They argue that the public just doesn't understand how much it costs to bring an individual drug to market. Most drugs that begin development in the lab ultimately fail and the drugs that succeed must be priced upwards to compensate for the research and development costs across the company.
          On the other side of the political equation are organizations like the American Association of Retired People (AARP) argue that the costs of drugs are far too high because the drug companies build in too much profit and marketing into the cost structure of their drugs. The AARP has pushed hard for a Medicare drug benefit, but is open to various proposals to accomplish this. Said one spokesperson, AARP advocates "a Democrat benefit plan with a Republican delivery system." But there are more than two sides to the issue as the problem involves a huge swath of the health care industry. Hospitals, for example, are all for a Medicate prescription drug benefit as long as it doesn't cost them anything. The lobbyist for one hospital association told us, "Whatever you do, just don't cut hospital payments."
          Although President Bush says he favors a prescription drug benefit for Medicare, finding common ground has been difficult. Not only do Democrats and Republicans differ on what to do, a band of very conservative Republicans differ with Bush and their congressional leadership on the issue. They want a deal that couples a prescription drug benefit with other changes that would reduce overall Medicare costs. The enormous expense of such a benefit became more of a stumbling block since the recession and the war in Iraq have pushed the federal budget into a deep deficit. Still, the political benefits of passing a plan pushed House and Senate negotiators closer together and a bill seemed possible sometime before the 108th Congress expired.