By BRUCE TAYLOR SEEMAN and CAROL ANN CAMPBELL,Newhouse News Service

WASHINGTON – Six weeks after its much-anticipated rollout, the federal government’s Medicare drug program remains in turmoil.

Serious processing problems and complicated guidelines have combined to create a potentially life-threatening hardship for the nation’s low-income elderly and disabled.

The system is so chaotic that 29 states have stepped in, paying tens of millions of dollars for drugs to keep people well. And there’s no end in sight.

How did this happen?

Go back to the summer of 2003. That’s when Congress began writing legislation aimed at lowering drug costs for the nation’s seniors, a formidable voting bloc that had long pushed for such coverage.

The idea, once backed by President Bill Clinton and later by George W. Bush during the 2000 campaign, finally got the backing of major Washington players.

But Republicans and Democrats envisioned very different plans.

Democrats wanted any new program to keep drug prices down by allowing the federal government to negotiate directly with pharmaceutical companies.

To Republicans, such government negotiation smacked of price controls. They wanted private insurance plans to compete to drive down prices without stifling the drug industry.

“Price controls send a message for the (pharmaceutical) industry to stop taking risks and to reduce research and development,” said Robert Helms, a scholar at the American Enterprise Institute, a conservative think tank.

The program took shape in the Capitol basement, where legislative aides from both parties hopscotched between conference rooms for frequent meetings. Pressure was intense. “This will likely require some evening and weekend meetings,” a Republican aide wrote to participants in late September.

Then, for most Democrats, the invitations stopped. And doors to the meetings closed.

Lucrative law

What came next had all the markings of big-money politics in action.

A mostly Republican team eventually emerged Nov. 15 with a law they promised would cut drug prices for seniors.

Democrats, however, claimed the bill was a billion-dollar giveaway to drug makers and the insurance industry.

Intense lobbying had resulted in significant subsidies for the health insurance industry. Billions of dollars in subsidies not only allowed insurers to offer stand-alone drug benefits but helped HMOs – health maintenance organizations – fashion overall health insurance plans that were more attractive to seniors.

When the legislation squeaked through the House of Representatives on Nov. 22, the 220-215 roll call vote ended near dawn. The Senate passed the bill three days later and Bush signed it Dec. 8.

The final legislation showed the difference in philosophy between the Republicans and the Democrats. And critics say those philosophical underpinnings have led to the problems today.

Competition means hundreds of different plans throughout the country offer different premiums, co-pays, covered drugs and policies.

Many call the system unwieldy and complex, and overly weighted to benefit private insurance plans, not beneficiaries.

“I used to be able to say, “OK, … this is what you need to do,”‘ said Judith Stein, executive director of the Center for Medicare Advocacy, a national nonpartisan organization.

“Now I have to ask, “What is your income? Your plan? Is it a Medicare advantage plan or stand-alone? What is the plan’s drug formulary? The dosage? It’s so much more complicated.”

Many of the problems at the drugstore counters involve the 6.2 million people on both Medicaid and Medicare because their coverage was moved from state Medicaid programs to private Medicare insurance plans. Many of these poor, disabled or elderly people could not get their drugs because of various computer problems and administrative foul-ups in the massive transfer of information.

Just a month after its startup (and after much bad publicity), Medicare Part D, which the Bush administration initially called a top domestic policy achievement, wasn’t even worth a mention in the president’s recent State of the Union address.

Mark B. McClellan, current administrator of the federal Centers for Medicare & Medicaid Services, acknowledged problems with the program, which he called the biggest health care initiative in 40 years. But he told Congress the drug benefit eventually will work as promised.

“This great new experiment must be given ample time to get over its growing pains,” he said.

Robert Ball remembers the first rollout of Medicare 40 years ago. Ball, a Social Security commissioner in the mid-1960s who oversaw construction of the giant Medicare program, says the drug benefit eventually will be scrapped.

“The problem is a fundamental flaw in the design in the program, and it won’t just disappear,” said Ball, who worked in the Johnson administration. “I think the idea that individuals are in a position to make sensible choices about what drug plan suits them is a myth. It’s too complicated.”

Ball doesn’t have to convince James Gaskin, who used to get his drugs through New Jersey’s Medicaid program.

“Everything was going fine until the president starts this thing,” said Gaskin, 71, of Red Bank, N.J.

Gaskin said he takes medications for heart and breathing problems. Now, even though he believes he’s enrolled in Medicare Part D, he hasn’t received a drug card and his druggist has been unable to verify his coverage in any plan.

“Everyone is telling me, “This person knows the answer.’ But when you ask that person, they don’t know,” Gaskin said. “If something isn’t broke, why are you fixing it?”

Solution or experiment

Two Democrats allowed to participate in final negotiations on the drug plan were Sen. Max Baucus of Montana and now-retired Sen. John Breaux of Louisiana.

A member of his staff said Baucus “always said this is not the bill that he would have written himself, but that this was a start.”

Breaux characterized the program as a “huge experiment” that represented a logical mix of government and the free market. Though he’s optimistic, he said, it may take a year to judge the program’s merits.

“The government can help pay for it and make sure no one tries to scam it. They can run it,” Breaux said. “The private sector can bring about innovation and competition that lower prices.”

However, critics insist the system will not lower drug costs but, instead, amount to a windfall for drug companies.

Families USA, a liberal advocacy group, said an analysis of the new system showed 19 of the 20 most-used drugs in two regions were significantly more expensive than those purchased through the Veterans Affairs Department. Bush administration officials say the VA drug purchasing system differs too much from the Medicare plan to make a meaningful comparison, but Families USA disagrees.

Federal officials concede they are disappointed by enrollment rates among 42 million eligible Medicare beneficiaries. So far, 24 million have Medicare drug coverage. The numbers include more than 20 million automatically covered through either Medicaid or other government retirement or subsidy programs. The number of people who enrolled voluntarily is 3.6 million.

Officials say the program is working well for many people, and that the average person is expected to cut drug costs in half, saving about $1,200 a year.

But health care analysts say the program is far from proving itself. The startup has been particularly painful for poor seniors who already were receiving drugs through Medicaid.

Moving on

Rep. Henry Waxman of California, the senior Democrat on the House Government Reform Committee and an outspoken critic of the Medicare Part D program, has asked the nonpartisan Government Accountability Office to investigate whether the new law represents a windfall for drug companies.

“This was a corrupt process handled in back rooms,” Waxman said.

Critics note that after the drug legislation passed, the two chief architects of the multibillion-dollar program left government to take high-paying jobs in the drug and health care industries.

Former Rep. Billy Tauzin, R-La., retired from Congress to become chief executive of the Pharmaceutical Research and Manufacturers Association – PhRMA, the drug industry’s top lobbying organization. And Thomas Scully, appointed by Bush to run the Centers for Medicare & Medicaid Services, took two jobs after leaving office – one with the country’s largest private equity investor in health care and another with an Atlanta-based health care law firm.

Tauzin, who aides said was attending to a family matter, could not be reached for comment. But an aide spoke on his behalf.

“There was no conflict of interest,” said Ken Johnson, a senior vice president for PhRMA who also worked for Tauzin in Congress. “When approached by PhRMA, Billy had already decided to leave Congress for health reasons. Most importantly, the Medicare bill had already been signed into law by the president.”

Scully defended his swift move to the private sector. “I was in health care for years. What do people want me to do, sell cars?”

He also defended the drug program, saying startup problems will be ironed out and that he is “very confident” the initiative will succeed.

Others agree, saying federal employees are working feverishly to fix problems and noting that Medicare now is filling 1 million prescriptions a day and helping middle-class seniors around the country save money on their drugs.

Joseph Antos, a scholar at the American Enterprise Institute, said the problems eventually will sort themselves out. But he estimated the shakeout could take a year. “No big human program works perfectly the first time,” he said.

But as the program struggles to correct databases and issue long-awaited prescription drug cards, some Democrats are seizing their I-told-you-so moment.

“If we were able to participate in the conference, we wouldn’t have the fiasco we have today,” said Rep. Charles Rangel, D-N.Y., who was barred from final bill-writing sessions even though he was a top Democrat on the committee responsible for Medicare legislation. “The medicines are life-saving, and (people) can’t get them because of this incomprehensible bill.”

Former Sen. Tom Daschle, D-S.D., as minority leader the highest-ranking Democrat at the time, said he was shocked when he and his staff were blocked from meetings in an office controlled by Rep. Bill Thomas, R-Calif., chairman of the House Ways and Means Committee.

“They had who they wanted in the room and locked us out,” Daschle said. “We were told we were not allowed in. It was remarkable. It was bizarre.”

Aides said Thomas was unavailable and declined to discuss the bill-writing process on the record.

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