Analysis: Dems revive old idea to seize new momentum

NEWS ANALYSIS

President Obama and a key Senate Democrat have resurrected an old idea to regain their footing on healthcare reform.

After a week of major setbacks, Democrats on Saturday sought to change the narrative by touting a deal they struck with the pharmaceutical industry.

From a public relations perspective, it worked.

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The Associated Press ran an article that stated, “The deal marked a major triumph for [Senate Finance Committee Chairman Max] Baucus [D-Mont.] as well as the administration. Obama praised the deal.”

For the pharmaceutical industry – which worked closely with the GOP-led Congress and the previous administration – it was an olive branch showing that it is committed to working with Democrats.

The deal was announced on the eve of the Sunday talk shows, which are expected to tackle the bumps in the road that Democrats encountered last week on their efforts to revamp the nation’s healthcare system.

The $80 billion in savings committed by drug companies on Saturday will not specifically pay to cover the estimated 47 million Americans who are uninsured.

Instead, it will be allocated to close the so-called “donut hole” of coverage in the Medicare prescription drug benefit that then President George W. Bush and congressional Republicans muscled through Congress in 2003.

For years in the minority, Democrats vowed to fill in the donut hole, which force enrollees to pay 100 percent of the costs of their medicines even while they continue to pay monthly premiums until catastrophic drug coverage kicks in.

Since taking the White House and expanding their majorities in the Congress, Democrats – including Obama -- have largely been silent on addressing the donut hole.

Obama’s budget, released in February, did not even mention the issue.

Before Saturday’s developments, Democrats acknowledged that filling the donut hole would be very expensive and they were more committed to spending funds to cover the uninsured.

Saturday’s announcement suggests that Democrats want to cover the uninsured while also improving the Medicare drug benefit.

In essence, the savings to the benefit would come from expanding the already expensive entitlement program. The Congressional Budget Office (CBO) has estimated that getting rid of the coverage gap would cost $134 billion over 10 years.

And drug companies, as well as other healthcare providers, have not committed to other cost savings floated by Baucus that would hit their bottom line.

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Health policy analyst Alec Vachon on Saturday said, "The real question is -- how is this 'deal' a positive for the pharmaceutical industry? Given the sketchy facts, two speculations: First, the deal may allow industry to dodge new drug rebates that the Finance Committee had proposed, which are profit transfers to government. Even better, given that many seniors aren't filling prescriptions in the 'donut hole,' new 'donut hole' sales are likely very profitable -- even at discount prices because of the low marginal cost of drug manufacturing."

Cost issues continue to dog Democrats on healthcare reform. Obama has repeatedly vowed to enact a healthcare reform bill that is completely paid for. That would mean that the $634 billion he has called for healthcare reform would be paid for by tax increases or cuts to healthcare providers.

Covering even most of the uninsured, however, will cost well over $1 trillion and finding the offsets to completely pay for the bill are nearly politically impossible.

The CBO numbers released last week suggest Democrats have two choices: 1. Scale back their massive plans to cover most of the 47 million uninsured and seek coverage in incremental steps; or 2. backtrack on promises to pass a healthcare reform bill that will not add to the federal deficit.

On Saturday, Obama, Baucus and the Pharmaceutical Research and Manufacturers of America (PhRMA) maintained that their accord was a significant step forward.

The pharmaceutical trade group stated, “PhRMA is committed to working with the Administration and Congress to help enact comprehensive health care reform this year. We share a common goal: every American should have access to affordable, high-quality health care coverage and services.”

In a lengthy press release, Obama said, “This is a tangible example of the type of reform that will lower costs while assuring quality health care for every American."

A joint Baucus/PhRMA statement said, “This benefit is part of our continued commitment to seniors and our ongoing effort to reform health care by lowering health care costs and ensuring all Americans have access to the quality, affordable health care coverage they deserve.”

Baucus was one of the few Democrats who supported the 2003 Medicare prescription drug law. PhRMA backed it while Obama spoke out against it.

House Democrats were apparently not involved in these discussions.