Obamacare Sold Out America

A year later, he would find that game not so unpleasant after all.

"He succeeded where presidents for a half-century have failed, so it wasn't going to be pretty. And it wasn't going to be easy."

After he became president, Obama would indulge Tauzin in the same closed-door dealings he once lambasted. The drug industry agreed to taxes and rebates involving $80 billion in savings over ten years. In exchange, Obama welshed on three crucial promises: to speed generics to market, to allow the importation of cheaper drugs, and to retain the right to negotiate Medicare drug prices.

Sen. Bill Nelson (D-Florida) was among several congressmen who tried unsuccessfully to maintain negotiation rights. He proposed a bill that would have forced drug companies to match prices offered to other government programs (Medicaid, Veterans Administration) that do negotiate.

Florida Sen. Bill Nelson tried to enact legislation that would allow Medicare to negotiate drug prices.
Senate Democrats/Creative Commons
Florida Sen. Bill Nelson tried to enact legislation that would allow Medicare to negotiate drug prices.

"I'm not here picking on PhRMA," Nelson said at the time. "I just think, philosophically, that Medicare patients shouldn't be paying more than Medicaid beneficiaries."

But three Democrats — Sens. Baucus, Robert Menendez (D-New Jersey), and Tom Carper (D-Delaware) — teamed with Republicans to ensure that Nelson's bill was stillborn in committee. They were more ­interested in keeping their word to the drugmakers than in their duty to the American people.

"A deal is a deal," Carper explained.

A less-noticed provision gave pharmaceutical companies the right to extend patents on biologic drugs to 12 years — compared to the five years that conventional drugs receive. This might prove to be the greatest budget-buster of them all.

Biologics are the industry's new cash cow. They're more difficult to manufacture because they're grown rather than chemically assembled. This is the pretext for setting prices 22 times higher than those of ordinary drugs. Some prescriptions cost as much as $100,000 annually.

"Unfortunately, both the administration and leadership felt they should put a moratorium on Medicare being able to buy in bulk and access generic drugs," says Congressman Raúl Grijalva (D-Arizona). "In doing so, they locked in a price scheme that is many times out of control... We allowed the fox to control the henhouse."

Congress and the administration also repeatedly balked at the most direct route to lower prices — greater competition — even though much of the country was without it.

An American Medical Association study found that one insurer controlled more than half the market in 30 states. "In Alabama, almost 90 percent is controlled by just one company," Obama told a crowd in 2009. "And without competition, the price of insurance goes up and quality goes down."

Hit the hardest were rural residents, typically poorer and less healthy than the rest of the country. Metro areas offered the greatest profit, so big insurers and hospital groups had little incentive to ­compete for the countryside. Absent competition, premiums and hospital prices soared.

Many Democrats pushed for a public insurance plan, which would compete with companies such as Aetna for customers. But Republicans rallied to protect insurers, claiming it was unfair to make them compete with government.

"We shouldn't have ever called it a public option," says Kentucky congressman Yarmuth. "We should have called it 'Medicare for all,' and then people would have been for it, because 'public option' was too vague."

Sen. Kent Conrad (D-North Dakota) proposed a compromise by creating nonprofit insurance co-ops to compete with monopolies and provide coverage to rural areas. Actuaries suggested that $10 billion in grants would be enough to get co-ops started in every state. Yet the marionettes in Congress began to strip away their effectiveness almost immediately.

Sen. Ben Nelson (D-Nebraska), a former insurance exec and one of the wealthiest members of Congress, withheld his vote unless the grants were changed to loans, making sure the co-ops were saddled with debt from the beginning.

Others sneaked in measures barring the co-ops from competing for the more lucrative business of large employers and banned them from using the government loans for marketing. It was as if Congress merely wanted fig-leaf competition while quietly sabotaging any chance to actually compete.

The $10 billion in loans was continually sheared away. Democrats repeatedly agreed to deals with Senate Minority Leader Mitch McConnell (R-Kentucky) to strip the money away.

In the end, only 23 co-ops received funding. "They don't want to do anything to make the situation in the states better," Yarmuth says. "Instead, they're actively undermining the programs."

Nobody gave the co-ops much of a chance. They had to put together plans overnight, win competitive pricing from providers, and get word of their existence out without spending any of the government loan money.

Still, many were run by real pros with decades of experience. Take Dr. Martin Hickey, CEO of the New Mexico Health Connections co-op and a former executive with Cigna and Blue Cross. "This wasn't just a do-gooder thing," he says. "This was people who understood business, understood insurance and what it was going to take to make this really work. Hope is not a strategy."

Soon, co-ops were offering the lowest premiums in a third of the states in which they operated. And even when they weren't the lowest, they were providing enough competition to drive down all premiums by 8 percent.

In New Mexico's case, Hickey found that hospital groups had a motive to expand competition.

"We were able to sit down with large groups and say, 'This market is consolidating, and the last thing you want is one or two major players, because they'll hammer the hell out of you,' " he says. "I used to work at one. I know. 'It's in your interest to give us a good rate to give us a foothold in the market. We're ­physician-oriented and physician-led. We get it.' "

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