June 18, 2003

June 18, 2003 | Commentary on Health Care

Bad Medicine.

As the Senate rushes pell-mell to approve a prescription drug benefit for America's seniors, many long-time Washington observers are experiencing a sense of political deja vu.

 

 The Senate's "mad rush to drug-ment" could turn out as a replay of the 1988 fiasco that produced the short-lived Medicare Catastrophic Coverage Act (MCCA). The political winds blowing then are eerily similar to today's conditions:

 

 - A president committed to getting a so-called "Medicare reform" bill passed.

 

 - A congress eager to make good on campaign promises to help seniors who want Medicare to pay for drug coverage.

 

 - A rapidly growing senior population that wants more benefits at less cost.

 

The MCCA enjoyed all these elements: strong bipartisan backing, a willing White House, the backing of big-time lobbying groups, and tremendous public support.

 

Sure, government actuaries and independent economists raised concerns about the potential cost of the drug benefit and how it might affect seniors' wallets. But, in cavalier fashion, these nerdy irritations were swept aside. The bill, bathed in an aura of inevitability, sailed through both Houses and became law in June 1988.

 

But just three months later, Rep. Marilyn Lloyd, D-Tenn., took to the House floor to declare that senior citizens would be "taken to the cleaners" by the MCCA. Four days after that, Rep. Bill Archer, R-Texas, and 32 co-sponsors introduced a bill to delay its implementation.

 

By August, Ways and Means Committee Chairman Dan Rostenkowski, D-Ill., who strongly opposed repeal, found himself being booed and pursued down the streets of Chicago by irate senior citizens. Congress repealed the bill in November.

 

What happened?

 

For starters, Congress mistook public support for popular catch phrases as support for the MCCA. Just as people supported universal "catastrophic coverage" in 1988, so today they are said to support the idea of a universal Medicare drug benefit.

 

Then, as now, though, rhetoric doesn't match the reality. Most seniors already have drug coverage. They expect a "new" benefit "for all" to offer better coverage at a lower price, but they also want the right to keep what they've got if they like it.

 

With the MCCA, though, the drug benefit was self-financing; seniors would pay the full cost. But many didn't want to pay for the new benefits, including the drug one, especially if they were already being offered through other sources such as employers. Others simply didn't want to pay for any new Medicare benefits. Period.

 

Can't happen again? Well, this time, Senate leaders are billing taxpayers for the largest share of the unknown costs and making them assume most of the risks. And they're making the drug benefit "voluntary." But that doesn't mean all seniors will have a choice. Analysts warn that employers will drop drug coverage for their retirees. The Congressional Budget Office (CBO) estimates that 37 percent of all Medicare beneficiaries with employer-based drug coverage would lose it under the Senate bill.

 

Another problem is cost. In 1988, the CBO said the MCCA's drug benefit would be $5.7 billion over five years. A year later, it more than doubled the estimate -- to $11.8 billion. That's puny by today's standards.

 

The CBO's 10-year cost estimate for the Senate's new drug benefit is roughly $400 billion. Senators have attached scores of amendments, so that $400 billion "ceiling" could easily become a "floor." With each step the bill takes, more estimates will be made and more goodies added. Only after it's signed into law will the number crunchers be able to produce serious estimates.

 

Then, amid the inevitable recriminations, the agencies responsible for administering the program will desperately try to bring it in line with the budget by slashing expenses. Faced with soaring costs, they'll get the go-ahead from Congress to control costs and determine which drugs will be covered and under what circumstances.

 

The results: benefit rationing for patients, below-cost reimbursements for providers and reams of red tape. The highly regulated private "drug only" plans will start dropping out, and seniors will find themselves with fewer and fewer options, except for the government program. America's seniors with better private coverage won't like losing it, and they'll like it even less in a government program that starts to crimp on drug benefits to save on cash.

 

Unfortunately, politicians have a short-term view of the future -- one that extends no further than the next election cycle. They seem poised to walk into virtually the same political minefield they blundered into in 1988 -- and with just as much misplaced enthusiasm.

 

Robert E. Moffit is director of the Center for Health Policy Studies at The Heritage Foundation.

About the Author

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

Related Issues: Health Care

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