July 13, 1999 | Commentary on Health Care
Consider what happened in 1988, when Congress passed the Medicare Catastrophic Coverage Act with overwhelming bipartisan support and a brand-new prescription drug benefit. Within weeks of the bill's passage, seniors learned what this meant for their pocketbooks. The new "supplemental premiums" not only turned out to be more expensive than originally forecast, but they hit far more seniors than proponents had anticipated.
Many seniors became outraged, and public support for the legislation began to drop precipitously. Within a year the Congressional Budget Office doubled its estimate of what the program would cost. By late 1989, Congress was forced to repeal virtually the entire bill. The lesson of this debacle is clear: Cost estimates of government programs tend to be wildly inaccurate, and the public usually gets stuck with the revised tab.
Under the president's plan, seniors would pay $24 a month for 50 percent coverage of any drug expenses up to $2,000. This cost would gradually increase to $44 a month for 50 percent coverage of amounts up to $5,000. But this cap means the president's plan offers no protection for Medicare enrollees who face the highest costs. Seniors often fear losing their house or life savings because of the exorbitant expense of treating an illness -- a concern the president's plan fails to address.
The president's plan also gives as much help to the richest seniors as to the poorest. If Ross Perot incurred $4,000 in drug costs, he'd pay only $24 per month and get a $1,000 subsidy from taxpayers -- the same subsidy given to low-income seniors. Perot can afford the additional $3,000. Low-income seniors cannot.
Seniors may also be tempted to give up the better drug coverage some of them already have, either through employers, Medicare HMOs, or "Medigap" policies. Many seniors will mistakenly assume that the new Medicare benefit must be superior to other coverage, even though it would expose them to unlimited out-of-pocket costs. And some health plans may decide to drop prescription-drug coverage altogether because they see Medicare picking up the cost. Either way, seniors would be trading good drug coverage for an inferior Medicare benefit.
The president's plan also puts the government bureaucracy that runs Medicare in charge of deciding which drugs will be covered. But with multiple drugs available for each ailment or condition, how will the Health Care Financing Administration (HCFA) decide which ones to offer? After all, not all seniors respond identically to all drugs. What happens to seniors who find they can't take the HCFA-approved drug for their illness, perhaps because of an allergy? Their only recourse: out-of-pocket expenditures for the right drug.
Most American seniors have little or no trouble obtaining prescription drugs. According to the Bureau of Labor Statistics, seniors spent an average of $637 out of pocket on prescription and non-prescription drugs in 1997, compared to $1,193 dining out in restaurants. Only 4 percent pay more than $2,000 a year for their medications, according to the National Academy of Social Insurance.
For those low-income seniors who do need help, Congress should take two simpler, less expensive steps. First, it should change the rules governing Medigap insurance to permit insurers to offer drug-only coverage (with catastrophic protection). Currently, seniors must buy other expensive features just to get drug coverage. Second, it can provide low-income seniors with a larger subsidy than President Clinton proposes, allowing them to buy better protection for less money.
These proposals make more sense than creating another government subsidy for everyone over 65. And they would leave low-income seniors with enough money to buy food and medicine.
James Frogue is a former health-care policy analyst at The Heritage Foundation (http://www.heritage.org), a Washington-based public policy research institute.
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