July 25, 2002

July 25, 2002 | Commentary on Health Care

RX for Medicare

If you think Medicare's got problems now, just wait until Congress puts the finishing touches on its election-year effort to add a prescription-drug benefit.

The federal health-care program for our senior citizens is already straining under the weight of a complex fee schedule for doctors, a growing pile of incomprehensible regulations and a bureaucratic structure that gives patients little control over their care. The problems are bad enough that, according to the American Academy of Family Physicians, 17 percent of family doctors now refuse to take new Medicare patients -- hardly an encouraging development with the baby-boom generation nearing retirement.

It's not that Medicare patients couldn't use a prescription-drug benefit. Nearly all agree the program needs to catch up with the revolution in medicine that's taken place over the last few years as an array of wonder drugs that can extend and improve the lives of millions have hit the market.

But the fact that we're even having a debate today about something as basic as drug coverage (which has been available for years in private plans) shows how poorly designed Medicare is -- and why simply saddling it with a drug benefit won't solve the program's core problems.

Unfortunately, that's the only approach many lawmakers seem inclined to make. The House has passed its version of Medicare drug coverage, but in the Senate, no compromise has been reached, as both parties engage in a madcap competition to score political points and be crowned the seniors' friend.

Congress is bogged down in debate over how much the drug benefit in the various bills would cost, as if government estimates had a record of reliability. But look what happened when Congress passed the Medicare Catastrophic Coverage Act.

In June 1988, when the Act was passed, the Congressional Budget Office (CBO) estimated its prescription-drug benefit would cost $5.7 billion over five years. A year later, CBO more than doubled that figure to $11.8 billion. Other provisions of the 1988 Act also jumped in cost. This deadly combination of rising costs and new premiums for seniors sparked a political backlash. The result: In 1989, Congress repealed the Medicare Catastrophic Coverage Act, along with its prescription-drug coverage.

So with that event in mind, consider this: CBO now estimates that spending on prescription drugs, by or on behalf of seniors, would amount to $1.6 trillion between 2002 and 2011. Of course, based on previous experience, the cost of a Medicare drug benefit could be much higher. And that $1.6 trillion, mind you, is what CBO thinks will be spent up until the time the 77 million baby boomers start to retire and costs really start to skyrocket.

So do we offer no help to the one in four Medicare patients who currently lack drug coverage? (Most get coverage through their former employer's plan or through supplemental health insurance.) Of course not. Congress can give them direct and immediate assistance by combining a drug discount card with a generous federal subsidy to cover routine drug costs, coupled with a plan to provide private financial protection against the high costs facing some seniors. This would solve the problem of senior access to drug coverage and provide a steppingstone toward Medicare modernization.

Senate lawmakers should note that there's a precedent for such a program in the House-passed bill. The bill would create a Medicare prescription drug card discount program and set up a "transitional prescription drug assistance program" for low-income Medicare beneficiaries. The House proposal would provide immediate assistance in the form of subsidies to these seniors amounting to $300 million next year.

But if lawmakers truly want to help seniors, they'll go beyond this new benefit and reform Medicare along the lines of their own health-care program, the Federal Employees Health Benefits Program (FEHBP). It's a patient-centered, consumer-driven system that covers members of Congress, federal workers and retirees, and their 9 million family members. FEHBP members select the coverage they want from a variety of competing health plans, all of which offer prescription-drug benefits.

FEHBP is based on patient choice and a competitive market, two features that would go far toward healing our ailing Medicare program. Best of all, we know it works. Can lawmakers explain why they won't prescribe it?

Robert Moffit is director of domestic policy studies at The Heritage Foundation, a Washington-based public policy institute

About the Author

Robert E. Moffit, Ph.D. Senior Fellow
Center for Health Policy Studies