Health care economists said the drug benefit President Bush proposed for Medicare yesterday would be a bonanza for the pharmaceutical and managed-care industries, both of which are huge donors to Republicans.

Bush went before the friendly audience of the American Medical Association at the Washington Hilton to ask Congress to pass incentives for millions of senior citizens to switch from Medicare, the federally funded health insurance program for the elderly, to private health insurance in return for drug coverage. Those who stayed in Medicare would receive more modest benefits, including a discount of 10 percent to 25 percent at the drugstore checkout.

Marilyn Moon, a health economist at the Urban Institute, said Bush's plan would hand tremendous negotiating power to health insurance companies.

"By making the private plans such a central part of the future of Medicare, the government is going to have to meet their demands for greater contributions to the cost of care, over and above the subsidy for prescription drugs," Moon said.

Bush's proposal is vague on many points, including the terms for insurers. But Tricia Neuman, a vice president of the Kaiser Family Foundation, said the plan would have to provide a windfall for the companies, "or too few would participate for the plan to work."

The analysts said drug companies also could be expected to reap huge profits under Bush's approach. More senior citizens would be able to afford prescriptions, and doctors could be expected to write more of them. And drug company executives fear that federal price controls on their products would be the result if a drug benefit were provided within Medicare.

Bruce C. Vladeck, who was President Clinton's head of the federal agency that runs Medicare, said Bush's plan "strikes me as the kind of proposal the pharmaceutical companies would write if they were writing their own bill."

"A slew of private health plans would have nowhere near the negotiating power that Medicare would have if there was national drug benefit," said Vladeck, now a health policy professor at Mount Sinai School of Medicine in New York City.

If Bush's proposal were enacted, it could provide a high-profile benefit for industries that are reliable donors to Republican candidates and committees. The Center for Responsive Politics said that for the past two elections combined, pharmaceutical manufacturers gave $30 million to Republicans and $8 million to Democrats.

Health service companies and HMOs, a leading form of managed care, donated $10 million to Republicans and $5 million to Democrats over the past two elections, according to the center's figures.

Several administration officials said the drug and insurance businesses would profit from Bush's plan, which is estimated to cost $400 billion over 10 years.

But the officials said critics are ignoring the benefits that Medicare patients would receive from greater access to drugs and more choices of insurance. "I can't imagine anyone will say it's bad to get pharmaceuticals to people who need them," said a senior administration official working on the plan.

Thomas A. Scully, administrator of the Centers for Medicare and Medicaid Services, which runs Medicare, disputed the analysts' assessments. He said competitive bidding by health plans would result in "the same benefit for lower cost to the government and the beneficiary, within just a couple years." He said the plan also would drive down drug prices.

"The only success anyone has seen in controlling drug costs has been when private health plans have used the power of the market to negotiate cheaper rates," Scully said.

Karen Ignagni, president of the American Association of Health Plans, said managed care would "stretch the dollars and improve the quality" for Medicare patients by emphasizing preventive care and encouraging the use of generic drugs, among other ways.

The White House's proposal appeared to do little to bridge differences on Capitol Hill that have repeatedly prevented passage of changes to Medicare, even though a drug benefit has been a touchstone promise for both parties in the past several elections.

"The time for action is now," Bush told the doctors, who interrupted his remarks with standing ovations, especially when he touted his plan to limit liability in medical malpractice cases.

Bush, promising to bring more free enterprise to medicine, denounced "government-run health care ideas," and said he aims for a system "in which the patient-doctor relationship is the center of good medical care."

Democrats denounced Bush's plan as an effort to privatize an essential entitlement. And key Republican lawmakers said Bush's version is unlikely to pass without a more generous allowance for people who choose to remain in Medicare.

"The bottom line," said Rep. W. J. "Billy" Tauzin (R-La.), chairman of the House Energy and Commerce Committee, "is that for those who don't want to even think about a choice here, who want to stay in fee-for-service, you have to give them an adequate drug coverage."

© 2003 The Washington Post Company

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