Health Care Has a Relapse

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Under political pressure to do something about drug costs, 28 states are offering prescription assistance. Since they can't afford to pick up the tab, most are trying to force pharmaceutical makers to cut costs--so the country is becoming a legal battlefield on which states are locked in hand-to-hand combat with drug companies. A federal judge last week ruled that Maine could force drugmakers to provide discounts of up to 25% for people with incomes up to three times the poverty level. It was the third such defeat the industry had suffered against such programs in three months. That same day Montana sued 18 drug firms it accuses of illegally inflating prices. Governors say Congress would make their guerrilla campaign a lot easier if it would change the laws that allow pharmaceutical companies to hang on to their patents and prevent cheaper generics from coming to the market.

To the degree that Washington is making any serious effort to get something done on health care, it's on noble-sounding legislation known as the patients' bill of rights, which does nothing to help the uninsured and could actually make costs rise even more. Bush and Senator Edward Kennedy have quietly reopened negotiations on the question of whether and how patients should be allowed to sue their managed-care companies. But while the HMO-reform measure was a crowd pleaser when the idea started kicking around five years ago, it is merely a "version of the Maginot Line" against the health-care problems facing the country, says Steven Schroeder, president of the Robert Wood Johnson Foundation, which leads a coalition of business, labor and health-care groups trying to call attention to the uninsured--40 million and growing. The recession is likely to be over before Congress does anything to get health coverage to the 2 million latest additions to those ranks. A bill to provide temporary health coverage for laid-off workers has been stuck in a partisan wormhole since last fall because Republicans and Democrats can't agree on whether it should be done in the form of tax credits or a new entitlement.

The economic slump is not the only reason people are finding it tougher to afford health care. While managed-care companies used to have the economic clout to force doctors and hospitals to take the rates they offered, a round of hospital closings and mergers has given the providers more bargaining power. And consumer anger--fueled by horror stories of insurance-company bureaucrats denying lifesaving drugs and medical procedures--has forced HMOs to ease restrictions that helped hold insurance prices down. What's more, growing numbers of businesses and consumers are abandoning HMOs. In California, the state that pioneered managed care, the percentage of people enrolled in HMOs has fallen below 50% for the first time in eight years. Most are moving toward costlier plans with higher premiums and more out-of-pocket expenses.

With costs rising so quickly, consumers trying to navigate the health-care market on their own have fewer and fewer realistic alternatives. In the Chicago area, Kimberly Godboldt, 25, an office manager who is a single mother of two, got a $10-an-hour raise in January, only to find that she then earned too much to qualify for Medicaid. Her employer, a doctor's office, does not have a health plan. The best deal she could find on private insurance was $400 a month, and because of recent cuts in Illinois's CHIP program, someone at Godboldt's income level would have to pay a monthly deductible of $2,300. She recently had to pay $450 when her 6-year-old daughter needed X rays and blood work. "It was really hard, but I didn't have a choice," Godboldt says. "She was so sick, and we didn't know what was wrong." Anxieties like hers explain why, in Republican pollster Bill McInturff's surveys, twice as many people (14%) thought it likely that they would have trouble paying for a major illness as expected to lose their jobs (7%). And why, for the first time in several years, McInturff's numbers indicate that more than 30% want to see the nation's health-care system "radically changed."

If national politicians are not feeling the heat yet, they will soon. Tom Strickland, a Democratic former U.S. Attorney in Colorado who appears headed for a tight Senate race against G.O.P. incumbent Wayne Allard, says except for a brief spell around Sept. 11, "health care has been the No. 1 issue we're encountering." At a get-together with a coal-company executive three weeks ago, he expected to be asked about energy policy. Instead, the businessman complained that his firm's policy of covering its retirees' prescription-drug costs was draining $10 million a year from the bottom line. Says Strickland: "Every day I'm on the campaign trail, every meeting I have, that's an issue that just screams for attention."