Sunday :: Nov 16, 2003

Exposing the Bush/GOP Energy and Medicare Drug Bill Shams

by Steve

With the legislative calendar winding down before the start of the campaign season next year, the White House and GOP congressional leaders stood vulnerable to charges that one-party control of all three branches of government had led to a dearth of help for consumers. On the issue of a Medicare drug benefit, which was one of Bush’s campaign promises, as well as new energy legislation spurred from the power blackout earlier this year, Bush and the GOP were increasingly worried about a voter backlash due to a lack of progress. A closer look at the bills that emerged over the weekend show how one-party control and the bankrolling of that party by the affected industries can lead to legislation that enriches those industries but does little to help the affected consumers.

The energy bill that emerged from a process almost devoid of Democratic participation looks to be a grab bag of tax breaks and other goodies for energy, oil, and gas industries. Yet there are no required production mandates or means testing of these benefits for these industries, and in fact it appears that industry needs to do nothing to benefit from the breaks. Consumers will see little benefit from any of the changes, and what changes they will see will not arrive for five years when a new indirectly taxpayer-funded natural gas pipeline begins delivering new Alaskan supplies to the lower 48 states.

Consumers may not notice a direct benefit from the energy deal except an eventual stabilization of skyrocketing natural gas prices in at least five years when an Alaska-to-Chicago natural gas pipeline is built, said Severin Borenstein, a business professor who is director of the University of California Energy Institute.

"For consumers I think this will have a pretty minimal effect on the energy picture," Borenstein said Saturday.

The bill provides $18 billion in loan guarantees to private companies to build a natural gas pipeline from Alaska, where there is an abundance of natural gas but no way currently to get it to the lower 48 states.

But the coal industry got $2 billion in assistance to build questionable “clean coal” plants, and the nuclear power industry managed to get catastrophic insurance assistance from the government. However, there were few if any new incentives in the bill for green power, and no required fuel efficiency increases to be found. The bill, in sum, was a perfect bill for an industry that has given over $130 million in contributions since 1999, three quarters of that to Bush and the GOP.

President Bush took office promising to develop a new energy policy. Since then, energy-related businesses have contributed nearly $70 million to lawmakers and political parties, with about three-fourths of it going to Republicans, according to an analysis of Federal Election Commission records by the Center for Responsive Politics.

The energy sector also gave an additional $67 million — $50 million of it to Republicans — during the 2000 election cycle, when Bush won the presidency and Republicans regained control of the Senate.

Energy interests have been "giving heavily to the Republicans for a long time, and this is what it's all about in the end. It looks like they got an energy bill that they wanted," said Larry Noble, executive director of the Center for Responsive Politics, a bipartisan research group.

Worse yet, it is not clear if the bill will do anything to prevent another blackout, since the provisions sought by the Federal Energy Regulatory Commission to improve the power grids and the redirection of electricity in a crisis were delayed by three years in the bill to please southern energy producers.

And adding insult to injury, a break for industry inserted by Tom DeLay and Billy Tauzin would relieve MTBE producers from liability for contaminated drinking water lawsuits filed by consumers and state and local governments, effectively transferring the costs of such cleanups from the manufacturers to the taxpayers.

Again, the bill that emerged from the GOP negotiations will do virtually nothing to require increased energy production or cleaner industries, improve efficiency, reduce consumption, fix and improve the power grid, or require industry to pay for its contamination. But it will manage to enrich the bottom line of industry, relieve them of the liability for their actions, cripple state and local governments over cleanup costs and generate even more campaign contributions to the GOP.

From Karl Rove’s view, a perfect piece of legislation. From the view of consumers and government, a disastrous piece of corporate welfare that cannot demonstrate any improvements for society as a whole.

The other area of vulnerability for Bush and the GOP was the lack of progress towards a Medicare drug benefit. Negotiations were concluded on a compromise package yesterday, and again, once you look beyond the rhetoric, one can see that little progress was actually made to provide immediate relief for seniors from high drug costs. However, the bill that emerged will help the GOP claim victory in 2004 and fatten the bottom lines of the pharmaceutical and health insurers who also bankroll Bush and the GOP.

The most important thing to remember when you hear the GOP crow about their major accomplishment in helping seniors with their drug costs is that the package does not take effect until 2006. Between now and 2006, the best the GOP could do was to give seniors a chance to buy a drug discount card that can save up to 15% in drug costs. Although the package that emerged will provide drug coverage, it will do so with significant monthly premiums, deductibles, and coverage gaps.

Beginning in 2006, Medicare beneficiaries could sign up for a stand-alone drug plan or join a private health plan that offers drug coverage. They would be charged a premium of $35 per month, or $420 per year. After meeting a $275 deductible, insurance would pay 75 percent of drug costs up to $2,200.

Coverage gap:

No coverage for drug costs between $2,200 and $3,600 out of pocket.

Catastrophic coverage:

When out-of-pocket spending reaches $3,600, insurance covers 95 percent of drug costs or requires a modest co-payment.

Low-income subsidies:

The premium, deductible and coverage gap would be waived for people earning up to $12,123 a year. To qualify for the subsidy, seniors could have no more than $6,000 in fluid assets. The subsidies would be phased out between $12,123 and roughly $13,500 in yearly income.

As you can see, even the low income subsidies have means tests that phase out at a low level of income, leaving seniors exposed to significant coverage gaps of 25% of all costs up to $2200 a year, and 100% of all costs between $2200 and $3600 per year.

The plan also requires competition between traditional fee for service Medicare and managed care plans in 2010. However, the possible poison pill in the bill is a requirement that in the event general revenues are projected in future years to fund more than 45% of Medicare costs, the president and Congress must consider program and benefit cuts to bring those cost back down under the 45% threshold. According to an analysis by the Center for Budget and Policy Priorities (CBPP), under current projections, this politically risky requirement would take effect three years after Bush leaves office in 2011.

The proposed mechanism would treat general-fund financing beyond the 45-percent level as inappropriate and something that must be avoided. Yet establishing a limit on the percentage of Medicare expenditures that can be financed with general revenues (rather than, for example, creating a trigger that is tied to the percentage that Medicare constitutes of the economy or the federal budget) would contradict the basic principles of Medicare’s financing structure. By law, all parts of Medicare except hospital costs are financed by general revenues (and premiums), not by payroll taxes. General revenues are supposed to constitute a substantial share of Medicare financing.

Moreover, as a result of advances in medical practice that are shortening and deemphasizing hospital stays and relying more on outpatient services and drug therapies instead, Medicare costs for physician and outpatient services and prescription drugs — the parts of Medicare that are (or would be) financed by general revenues — are rising faster than Medicare hospitalization costs. This continuing shift in medical practice helps to moderate the growth in Medicare costs and is a positive development. It also causes the proportion of Medicare expenditures that is financed by general revenues to rise. General-revenue financing is projected to reach the 45-percent level sometime in the 2015-2020 period and to rise above that level in subsequent years. The general-revenue percentage of Medicare is likely to rise in all years even if Medicare spending grows more slowly than projected.

CBPP states that such a cost containment requirement is nothing more than a well-masked ideological effort to kill Medicare, by applying a trigger mechanism that isn’t applied to revenue draining tax cuts or other entitlement programs.

Most importantly, the Medicare drug bill does nothing to address the rising cost of drugs, which of course pleases Big Pharma, which gives lavishly to Bush and the GOP.

So in the weeks ahead, as the GOP crows about their successes on energy and Medicare, remember that the bills are really nothing more than corporate welfare in the case of the energy bill, and a masked attempt to kill Medicare and provide little cost relief immediately for seniors in the case of the Medicare drug benefit.

But it will allow Karl and the GOP to claim victory, unless the Democrats can effectively point out these shams.

Steve :: 4:58 PM :: Comments (2) :: Digg It!