Wednesday, July 19, 2006

Bush, Medicare, and Crony Capitalism

I've often thought that the only real philosophy that drives Bush, the one thing consistent about everything he does, is his zeal to reward his friends and cronies. No-bid Halliburton contracts, repeal of the estate tax, and even the infamous Medicare Part D prescription drug reform. This was supposed to be a cynical Rovian scheme to siphon the elderly from the Democratic camp, but even here, the lobbyists wrote the legislation to their benefit.

Jonathan Cohn, TNR's healthcare expert, has the goods: he quotes a study by Dean Baker at the Center for Economic and Policy Research, suggesting that a better designed program could have delivered the benefit and hundreds of billions of dollars less. And remember the Bushies threatened to fire the Medicare actuary when he had the audacity to come clean with the true cost of the benefit.

As Cohn points out, costs were driven up by: (i) the government's insistence that private insurers administer the benefit, who needed extra subsidies to serve the high-risk Medicare group (and of course, huge marketing and administrative expenses), and (ii) the ban on allowing the federal government use its leverage to negotiate lower drug prices (this is behind the cheaper Canadian drugs). But it's even worse than that, as noted by Milt Freudenheim in the NYT. The elderly poor who used to get drugs through Medicaid will now get them through Medicare. Medicaid prices are lower, as the states negotiate with the drug companies. But this group (6.5 million people) will now get their drugs through higher-priced Medicare which means... dah dah!.... a $2 billion subsidy for the pharmaceutical industry this year, at the expense of the taxpayer of course.

Welcome to crony capitalism, Bush-style. Suharto could not have designed it better.

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