Despite the best efforts of the Bush Administration's public relations machine, Americans made it clear last year that they were in no mood to privatize Social Security. But the Administration had already won a quieter victory with an equally successful social insurance program, Medicare. Part D, the new prescription drug benefit that took effect January 1, looks like the first step on the way to destroying Medicare as a benefit for all senior Americans.

It's too early to tell whether Medicare Part D will be a flop like its predecessor, a drug discount card program that attracted only 15 percent of eligible seniors. But it may well be. So far only about 1 million have voluntarily signed up--fewer than 5 percent of the 21 million eligible seniors, most of whom have been without prescription coverage. At a carefully scripted press conference just before Christmas, Health and Human Services Secretary Michael Leavitt put a positive spin on the numbers, noting that another 21 million seniors were receiving coverage. But most of those enrollees were low-income people the government automatically enrolled, or those already receiving drug benefits elsewhere. The new plan is not yet reaching most of the people it's designed to help.

Unlike other Medicare benefits, Part D is modeled on the country's dysfunctional commercial health insurance system. With Medicare Parts A and B, which cover hospital services and doctor visits, the government pays providers directly. Under Part D, the government pays some 260 private insurers--including pharmacy benefit managers, HMOs and pharmacies--to provide the coverage. If seniors want the benefit, they must buy it from one of those private carriers. To force them to sign up, Congress imposed a financial penalty (growing more onerous over time) for those who don't get on board by May 15.

Medicare Part D represents the free market run amok. "You don't have to understand every detail and every option," Medicare administrator Dr. Mark McClellan told the Los Angeles Times. "People just need to focus on what they want." Easier said than done. In some counties, seniors have forty or fifty choices of plans--a jumble of insurance options with monthly premiums ranging from zero to more than $60. The government has allowed sellers to mold Part D coverage into hundreds of combinations of deductibles; co-insurance (a percentage of the drug cost consumers pay); drug utilization techniques (such as trying cheaper generic drugs first); and drug tiers, with their own dizzying array of co-payments (the flat amount consumers pay for each drug). Co-payments differ depending on whether people buy generics, preferred brand drugs, non-preferred brand drugs or specialty drugs--and depending on whether they buy from an in-network pharmacy where the insurer has negotiated good discounts or from an out-of-network pharmacy where it hasn't. Adding to the confusion is the fact that there's no standard nomenclature; sellers can use any fanciful name they think will lure buyers to their plan. They can also cover whatever drugs they want to; prescription formularies are not standardized either.

And what happens when seniors are understandably flummoxed by the overabundance of options? They're sent to a complicated web tool for answers--even though, according to one survey, three-quarters of seniors say they have never gone online.

This teeming marketplace, with its myriad sellers all offering their own versions of Part D, was no accident. The push for private market benefits began in earnest nearly a decade ago, when the right-wing Heritage Foundation proposed a bipartisan commission to look at "reforming" Medicare. In 1997 Heritage got its commission, chaired by then-Louisiana Senator John Breaux. A moderate, business-friendly Democrat, Breaux pushed a plan that would have given beneficiaries a set amount of money to buy health coverage in the private market. In the end it didn't fly. But in late 2003 moderate Democrats and Congressional Republicans, led by then-House majority leader Tom DeLay and Senator Breaux, saw their chance to move toward a privatized Medicare. Public outcry over escalating drug prices had caught the attention of Congress, and a drug benefit desperately needed by many seniors became the justification to pass legislation that took a big step toward privatization.

Think of Part D as Version 2.0 on the way to a Medicare system that relies completely on the private market. (The discount cards introduced in 2004, also provided by private insurers, were Version 1.0.) Congress appropriated $400 billion to finance Part D, a number that Richard Foster, chief actuary at the Centers for Medicare and Medicaid Services, later said was much too low. According to several news reports, Bush Administration officials prevented the agency from disclosing the real cost, then estimated at $550 billion, according to Foster.

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