June 17, 2003
By Stuart M. Butler, Ph.D.
With the support of the Bush administration,
or at least with its acquiescence, Congress appears on course to
enact a huge new entitlement aimed at middle-income Americans.
President Bush likely
will sign whatever Medicare drug bill emerges.
As Nancy-Ann DeParle, a Medicare administrator for President
Clinton, puts it, "In signing it, as he will surely be forced to
do, he will preside over the biggest expansion of government health
benefits since the Great Society."
The legislation makes
a mockery of sensible budget control or prudent reform. Rather than
combining steps to help some seniors while reforming the
unsustainable finances of the Medicare program, the "reforms" will
reduce choice and innovation and impose staggering financial
burdens on our children and grandchildren.
proponents of the legislation maintain that the new drug benefit
will cost $400 billion over the next 10 years. But this is a guess.
Since the program is an entitlement, there's no fixed
from both the private and public sectors in recent years suggests
that future costs will likely exceed projections. But even if
they're accurate, it isn't the next 10 years that matter. It's the
years after that, when the full force of the baby boom
generation hits Medicare and Social Security age. Within 15 years,
Medicare already faces a Niagara Falls of red ink. Adding a drug
benefit without serious reforms and constraints on future spending
means massive tax burdens on generations to come.
The bill is needed,
say leaders of both parties, to help seniors who face heavy
prescription-drug costs. To be sure, many lower-income elderly do
need help. But today about three-quarters of all seniors already
have private insurance against onerous costs. Congress' approach
would institute a government-sponsored drug program for all
Medicare recipients, not just those who need help. For several
reasons that approach is unconscionable.
First, there will be
powerful incentives for current and future middle-income seniors to
forgo private insurance protection at realistic prices in favor of
government-sponsored drug coverage at subsidized prices. Moreover,
corporations and other entities facing high retiree health benefits
will soon find creative ways to shift retiree drug costs to the
taxpayer. The result: taxpayer costs will rise further.
Second, proponents are
naïve when they claim that seniors will have many choices of
coverage under the legislation -- private plans as well as
traditional Medicare benefits. Hard lessons from the past suggest
that few private plans will join the program. Mass withdrawals of
plans from the existing Medicare+Choice program show what
happens when Congress imposes regulations and controls in an effort
to cut costs.
And in an effort to
curb a surge in spending, the government will no doubt gradually
tighten regulations on any private plans that do join the drug
program, leading to fewer and fewer private plans. It remains to be
seen how seniors will respond: When Congress last tried to provide
a drug benefit that jeopardized coverage many seniors already had
(in 1988) the backlash was so severe that Congress repealed the
legislation within a few months.
Third, proponents are
wrong when they claim the new program is modeled after Congress'
own health program, which includes drug coverage. The Federal
Employees Health Benefits Program (FEHBP) is open to virtually any
private plan or insurer meeting some basic benefit requirements and
consumer protections. Premiums vary and reflect the benefits
included in the plans, and federal workers choose from among many
By contrast, Congress
will determine the benefits in the current legislation, and the
government will decide how many of the lowest bidding preferred
provider plans can offer coverage to seniors in any area. And
because Congress would take a prominent role in influencing prices
and benefits -- unlike in the FEHBP -- the political dynamics would
work the same way they do today in Medicare. Politicians would be
pressured to keep prices down for their constituents, while drug
companies, doctors and seniors would press for ever-more generous
coverage. The result: larger and larger subsidies and costs to
President Bush and
Congress had an opportunity to combine help for some Americans in
genuine need with sensible reforms so that our children and
grandchildren might look forward to an affordable, high-quality
Medicare program. With the baby-boom generation approaching
retirement, this legislation probably is the last opportunity for
But rather than take a
firm leadership role in the legislative process, President Bush
sent Congress a framework and invited lawmakers to fill in the
details. The result was predictable. The process is becoming a
political feeding frenzy, in which short-term partisan advantage
trumps responsible action. Today's politicians may reap the
benefits, but future generations will have to pay for this
unforgivable failure of leadership.
Distributed nationally on the Knight-Ridder Tribune wire
With the support of the Bush administration, or at least with its acquiescence, Congress appears on course to enact a huge new entitlement aimed at middle-income Americans. President Bush likely will sign whatever Medicare drug bill emerges.
Stuart M. Butler, Ph.D.
Distinguished Fellow and Director, Center for Policy Innovation
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