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Medicare Reform Must Precede A Prescription Drug Benefit:

IP-6-2000 (April 2000)
Author: Linda Gorman

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Usually the Independence Institute only publishes documents written by Independence Institute authors. We made an exception here because this material is an excellent explanation of the tremendous public health problems that would be created by President Clinton’s proposal for price controls on prescription medicines. Thus, even though we have no position on the author’s proposal to expand Medicare to include out-patients, we think that the author’s description of disaster that price caps would create is very much worth reading.

Testimony of Mitchell E. Daniels, Jr., Senior Vice-President of Corporate Strategy and Policy, Eli Lilly and Company, before the Special Committee on Aging of the U.S. Senate, Room 562, Dirksen Senate Office Building, Washington, D.C., 9:30 a.m., Tuesday, Feb. 8, 2000:

Thank you, Mr. Chairman and Senator Breaux, for your invitation to be part of this forum. I wish to commend the Committee for engaging in these critically important issues.

Your decisions about the future of Medicare and the addition of a prescription drug benefit will affect millions of Americans.

We at Eli Lilly and Company applaud Senator Breaux’s efforts to bring the outdated Medicare program into the twenty-first century. A great deal has changed since Lyndon Johnson signed Medicare into law 35 years ago, and the challenge is immense.

Our basic goal, however, is relatively simple: we must focus on the best interests of the patient. While tremendous strides have been made in medical technology over the past 30 years, comparable progress has not been made in the Medicare benefit structure. When Medicare began in the 1960s, pharmaceutical cures were the exception, not the rule. Long hospital stays were much more common, and outpatient surgery was generally unimaginable. Many conditions easily managed today were largely untreatable then. Preventive care was virtually nonexistent.

Medical advances of all kinds have allowed seniors to live significantly longer and healthier lives. Yet, as dramatic as these advances have been, we are on the brink of new discoveries that will bring even greater benefits. Fueled by advances in our understanding of the life sciences, these discoveries will dramatically improve doctors’ abilities to prevent illness and to heal and comfort those who suffer. It is imperative that we have in place a system that provides the benefit of these discoveries to the patients who need them.

If Congress were enacting Medicare anew today, the program would bear no resemblance to its current form. Medicare was designed to guarantee quality health care for our senior citizens, but it is now disconnected, uncoordinated, inadequate, expensive, and unresponsive. The program has numerous design flaws and perverse incentives that would be unthinkable to someone designing a modern-day health plan. And Medicare beneficiaries suffer as a result.