Medicare bill a study in D.C. spoils system Part 1

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http://www.boston.com/news/nation/articles/2004/10/05/medicare_bill_a_study_in_d\

c_spoils_system/

 

Medicare bill a study in D.C. spoils system

 

By Christopher Rowland, Globe Staff | October 5, 2004

 

Last of three parts

 

Republicans went to great lengths to make sure President George W.

Bush won a Medicare prescription drug benefit for the elderly last

year. Among their feats: bridging 200 miles of New England countryside

with the stroke of a pen.

 

 

Setting aside economic differences, not to mention mountains and

rivers, the Bush administration plunked the University of Vermont

teaching hospital in Burlington into the same federal wage district as

metropolitan Boston.

 

On a map, the move makes little sense. Politically, the rationale

becomes clear. It resulted in a $23 million boost over three years for

Vermont's largest health-care institution and helped firm up critical

support for the Medicare bill from the state's independent senator,

James Jeffords.

 

" It defies belief that hospitals as far away from Boston as

Burlington, Vt., can be part of the Boston area and be paid millions

in Medicare payments, " said Frank McGinty, executive vice president

and treasurer of MaineHealth, a group of hospitals that tried and

failed to do the same thing.

 

The money for the hospital -- whose doctors and executives have been

an important source of campaign funds for Jeffords -- was a portion of

the tens of billions of dollars congressional leaders lavished on the

health-care economy as part of last year's Medicare prescription

benefit law. It is just one small example of how the Washington spoils

system went into overdrive as Republicans and Democrats alike sought

to build support for the bill while also taking care of their home

states and special-interest groups that mounted an enormous lobbying

drive.

 

What once began as a proposal for $253 billion in drug coverage for

seniors four years ago grew to a $400 billion grab bag for a broad

spectrum of players in the health-care economy. The staggering costs

rose yet another 33 percent when the Bush administration unveiled an

estimate this year that it had kept quiet during the 2003 debate over

Medicare: $534 billion.

 

Congressional leaders rewarded university medical centers, publicly

traded hospital companies, physicians, helicopter ambulance companies,

hospice providers, nursing providers, dialysis clinics, insurance

firms, and more. The bill benefited premier teaching hospitals from

Boston to Houston. Doctors in Alaska got an extra $50 million. Cancer

institutes with outreach programs for Native Americans got access to

government loans they never have to pay back.

 

The additions, which some supporters say were necessary to win support

for the bill, help explain how such a massively expensive bill,

contributing to record 17.4 percent Medicare premium increases this

year, could provide a prescription drug benefit that is viewed as

inadequate by many seniors. The actual costs of the bill are still

being debated 10 months after its passage, triggering calls in some

quarters of Congress to roll back some provisions.

 

" It became a feeding frenzy, " said Robert M. Hayes, president of the

Medicare Rights Center, a New York consumer group critical of the bill.

 

 

GOP leaders added final details behind closed doors at a joint

House-Senate conference committee, amid intense lobbying.

 

A Globe analysis of federal lobbying disclosure reports found that

drug companies, hospitals, doctors, nursing homes, HMOs, and other

health care companies and trade associations spent $311 million

lobbying Medicare and other bills in 2003. The disclosure reports do

not make it possible to determine exactly how much money was spent

lobbying directly on the Medicare bill, though it is clear most

activity was focused on the measure, the prime health policy

legislation of the year.

 

As they deliberated, members of Congress occupying key committees

gathered hundreds of thousands of dollars in health-care industry

campaign contributions.

 

" The Medicare program has now become a vast arena of special interest

politics, " said Robert E. Moffitt, a policy analyst at the

conservative Heritage Foundation. " It has been transformed from a

system where we were providing health coverage for seniors, into a

system where there is a massive redistribution of income among health

care providers. "

 

To date, most attention has focused on increased payments to Medicare

HMOs worth up to $46 billion and new profits that pharmaceutical

companies will get after the full drug benefit begins in 2006. Goldman

Sachs Group Inc. said the bill would increase drug industry revenues

by 9 percent, or $13 billion in the first full year, or more than $100

billion over eight years. A Boston University researcher who is a

critic of the drug industry estimated new profits at $139 billion over

eight years.

 

For several years before 2003, the drug industry fought a Medicare

prescription benefit because it feared government price controls. Drug

executives dropped their opposition after congressional leaders agreed

to a provision that specifically prohibits the agency that runs

Medicare from negotiating drug prices, letting companies set prices in

the private marketplace.

 

Less attention has been focused on other aspects of the bill. For

instance, the government agreed to pay about $71 billion in subsidies

to discourage corporations from dropping senior citizens from existing

private health plans and forcing them into Medicare. Hospitals across

the country will receive billions in higher reimbursements for

patients who are admitted to the hospital for everything from

appendectomies to open-heart surgery.

 

The White House defends the bill as a total revamping of Medicare,

including the introduction of long-term, systemic changes that rely on

private competition and other market forces that will make it

efficient and affordable.

 

" The president promised seniors not just a drug benefit, but a

stronger, more modern Medicare system, " said White House spokesman

Trent Duffy. " A drug-only approach to Medicare would have added a

costly benefit to a shaky Medicare foundation. "

 

Some advocates say the extra spending created cost gaps in the bill

that Congress solved by taking money away from the benefits for

America's elderly. In fact, congressional budgeters found $76 billion

in savings as they reviewed Medicare programs. But eager to build

support for the bill, leaders spent far more than that on programs

that had little or nothing to do with getting drugs into the hands of

seniors.

 

 

" That's how it got through, " said Valerie Cheh, a health economist at

the independent firm Mathematica Policy Research Inc., in Princeton,

N.J. " There's a little piece of everything in here for everybody. "

 

Here are some of those pieces, and how they were shaped:

 

Corporate welfare

 

Congressional sponsors said the $25 billion " rural package " of the

Medicare bill was a much-needed lifeline for struggling hospitals and

other providers in remote areas with small populations. But among the

biggest winners were private, for-profit corporations that own chains

of hospitals in both rural areas and small cities in the South and

West -- especially Texas, Arkansas, Tennessee, and Florida.

 

Chain hospitals in McAllen, Texas, a fast-growing area near the

Mexican border, and Corpus Christi, with a population of more than

250,000, are eligible for money under the rural provision, according

to the Texas Hospital Association.

 

Stock analysts and the corporations themselves have estimated that

Medicare-related revenue increases for several chains specializing in

smaller communities -- Community Health Systems Inc., Health

Management Associates Inc., and Triad Hospitals Inc. -- will be in the

range of $8 million to $12 million a year for each corporation.

 

The money boosts reimbursement for patient visits, including an

adjustment to make payment rates the same as hospitals in big cities,

where Medicare rates had been set higher to recognize the greater

costs of labor and goods.

 

" This isn't just a one-time, throw-money-at-them, catch-up, " said

Robert Mains, an analyst with Advest Group Inc., in Saratoga Springs,

N.Y. " This is something they will permanently have as a benefit, "

 

The idea of large corporations reaping profits from reimbursement

provisions that were publicly billed as helping rural facilities

struck some as incongruous.

 

" When you have these big corporations running smaller hospitals, it is

not necessarily money going into the rural community, " said Lisa

McGiffert, a health policy analyst with the Austin, Texas, office of

the independent, nonprofit group Consumers Union. " It certainly isn't

the picture that was painted to members of Congress when they were

passing this bill. As often is the case, they pick a subject that is

soft and sympathetic, and large corporations would not be sympathetic. "

 

Executives of some hospital chains contributed heavily to the

campaigns of Republicans and Democrats, with a heavy tilt toward the

GOP. Continued...