The Business of Keeping People Poor

Business Week’s front page article this week, The Poverty Business, covers the recent boom in businesses and lenders preying on the poor. It elucidates a principle that my husband is fond of pronouncing — that it’s very expensive being poor.

In other news of poverty on the march, it appears from this piece by Paul Krugman that our new Democratic Congress was not able to forward one of the most important legislative initiatives of the first one hundred hours — that of negotiating drug prices for the Medicare seniors drug benefit. This is a huge disappointment to me, and to millions of families across the nation who were hoping for relief from the financial toll on seniors caused by the exorbitant cost of prescription drugs. Saddest of all, perhaps, is that the NAACP and the League of United Latin American Citizens have been complicit in this plot against medicare. From Krugman:

The plot against Social Security failed: President Bush’s attempt to privatize the system crashed and burned when the public realized what he was up to. But the plot against Medicare is faring better: the stealth privatization embedded in the Medicare Modernization Act, which Congress literally passed in the dead of night back in 2003, is proceeding apace.

Worse yet, the forces behind privatization not only continue to have the G.O.P. in their pocket, but they have also been finding useful idiots within the newly powerful Democratic coalition. And it’s not just politicians with an eye on campaign contributions. There’s no nice way to say it: the NAACP and the League of United Latin American Citizens have become patsies for the insurance industry.

To appreciate what’s going on, you need to know what has been happening to Medicare in the last few years.

The 2003 Medicare legislation created Part D, the drug benefit for seniors – but unlike the rest of Medicare, Part D isn’t provided directly by the government. Instead, you can get it only through a private drug plan, provided by an insurance company. At the same time, the bill sharply increased payments to Medicare Advantage plans, which also funnel Medicare funds through insurance companies.

As a result, Medicare – originally a system in which the government paid people’s medical bills – is becoming, instead, a system in which the government pays the insurance industry to provide coverage. And a lot of the money never makes it to the people Medicare is supposed to help.

In the case of the drug benefit, the private drug plans add an extra, costly layer of bureaucracy. Worse yet, they have much less ability to bargain for lower drug prices than government programs like Medicaid and the Veterans Health Administration. Reasonable estimates suggest that if Congress had eliminated the middlemen, it could have created a much better drug plan – one without the notorious “doughnut hole,” the gap in coverage once your annual expenses exceed $2,400 per year – at no higher cost.

Meanwhile, those Medicare Advantage plans cost taxpayers 12 percent more per recipient than standard Medicare. In the next five years that subsidy will cost more than $50 billion – about what it would cost to provide all children in America with health insurance. Some of that $50 billion will be passed on to seniors in extra benefits, but a lot of it will go to overhead, marketing expenses and profits.

With the Democratic victory last fall, you might have expected these things to change. But the political news over the last few days has been grim.

First, the Senate failed to end debate on a bill – in effect, killing it – that would have allowed Medicare to negotiate over drug prices. The bill was too weak to have allowed Medicare to get large discounts. Still, it would at least have established the principle of using government bargaining power to get a better deal. But in spite of overwhelming public support for price negotiation, 42 senators, all Republicans, voted no on allowing the bill to go forward.

If we can’t even establish the principle of negotiation, a true repair of the damage done in 2003 – which would require having Medicare offer seniors the option of getting their drug coverage directly, without involving the insurance companies – seems politically far out of reach. [full text]

With my own mother being almost 82 years old, I am perhaps more keenly aware of what goes on in the latter years of life and how much we as a culture seem to be in denial about how to help older Americans maintain their health as well as their financial independence. This piece in The New Yorker describes the lack of gerontology specialists across the country. It also makes clear that the only way to ensure any quality of life for yourself in old age is to save your own money so that you can afford things like medication and assisted living.

3 thoughts on “The Business of Keeping People Poor

  1. Excellent and needed discussion; I hope others will bring forward their experiences and suggestions. There is a horror to life in America, that of the horrid cost of access to medical care and medication. It is simply criminal to allow any citizens to live without medical insurance and needed drugs, simply because they do not have sufficient income to purchase insurance. There is simply no reason for our children to lack adequate care, especially when we throw $10 billion each month (or is it more?) into the corrupt quagmire of Iraq and out own families are wanting.

    There are horrors for even those of us with medical insurance. The marvelous advances in medicine have been purchased with a price tag for each patient far in excess of anything imagined a decade ago. Can government ethically deny treatment, life saving or life extending, simply because of cost. Yet, that seems to be the case.
    I have always been struck that the Congressional will to provide for the welfare of the nation has taken second place to Congressional will to provide fot its own welfare. Congressional members receive marvelous medical benefits, retirement benefits, and a host of ammenities paid for by taxes, but denied to us. The success of a nation is in the end determined by the care for the least among its population, and in this regard, we are failing terribly.

  2. Thanks, Mr. Wolberg. Your supportive comments are appreciated. Now if we could just do something about this problem!

  3. Motivating Americans to become activists in the health care “struggle” will require leadership and organization. One must be amazed that change is taking so long, or have we become so placid because of the placibo effect of a bandaid here and another one there. Tens of millions of Americans are without any medical insurance at all. Millions of our elderly confront poverty every day and deny themselves or are denied the care they require, as are millions of our children. I am astonished there has not been the organized effort needed to find remedies. I do not believe Congress will act unless forced to do so at the ballot box. Perhaps one response might just be organized State by State initiatives placed on the ballot that would allow voters to say that members of Congress as well as all state representatives are denied any tax funded medical benefits until such time as all citizens are provided basic benefits. A dear late friend, a Minnesota farmer all his 86 years, said you sometimes need to use a two-by-four upside the head to get a mule’s attention.

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