July 21, 2003
By Lanhee Chen, Ph.D.
"A sense of threat and
gloom now hangs over prospects for a Medicare prescription drug
benefit," Morton Kondracke writes in Roll Call newspaper.
Small wonder: Seniors are beginning to sense that the legislation
Congress recently passed won't help them much.
In fact, for many, things would get worse.
About three out of
every four seniors eligible for Medicare have some form of drug
coverage, many through their former employers. They get their drugs
for a small co-pay, usually $10 or less per prescription or a
minimal annual fee. According to the Congressional Budget Office,
more than one third of the retirees who have employer-based plans
will lose them under the Senate's version of the
Those seniors could
see price hikes as high as 60 percent, according to a new analysis
by The Heritage Foundation of data collected by the Center for
Medicare and Medicaid Services and the Senate Budget
In 2006, when the
legislation takes effect, the average senior will consume $3,080 in
prescriptions. Those with drug coverage -- assuming they wouldn't
be dropped from their plans like a 100-pound sack of flour in a
warehouse -- would pay, on average, $1,057 out-of-pocket. Those who
are dropped and thus forced into the program outlined in the Senate
legislation would pay $1,678, according to the analysis, a hike of
nearly 60 percent.
mightily to make ends meet would see their costs soar. A Medicare
beneficiary in 2006 who makes between $14,506 and $16,923, for
instance, would see out-of-pocket drug expenses climb, on average,
from $1,223 under a private plan to $1,652 under the Senate plan, a
35 percent increase. Those making slightly more -- between $19,341
and $24,175 -- can expect increases of more than 50 percent in
Why? Because the
Senate legislation has more holes than an Oklahoma oil field.
First, in the name of political expediency, it doesn't even take
the reasonable step of helping those who need it most -- low-income
seniors. One day, janitors will be forking over hard-earned tax
dollars to subsidize Bill Gates' drug costs.
Second, the $400
billion cost estimate is almost universally recognized as a joke.
The Senate is creating an entitlement here. That means it costs
whatever it takes to fulfill every claim, regardless of budget
constraints. If expenses grow too much, expect a future Congress to
treat the program as present Congresses treat Medicare -- by
cutting benefits, reducing payments to medical providers, hiking
deductibles and employing other devices that push costs on to
patients and their doctors.
Finally, consider the
formula the Senate proposes. Medicare patients would pay about $35
per month for drug coverage with a $275 deductible. From $276 to
$4,500, the government would pay half the costs. Patients would pay
all drug costs beyond that until they had spent $3,700 out of
pocket for the year, at which point government would pick up 90
percent of the remaining costs.
So, seniors with
$2,000 per year in prescription drug costs would have about half
that paid for by their government-provided insurance, but seniors
who spent $6,000 per year would have to come up with nearly
two-thirds. Only Congress, trying to make its math work regardless
of the consequences, could design insurance like this.
Research by my
Heritage Foundation colleague Edmund Haislmaier, shows that if the
legislation becomes law, most employers will do one of three
things: Drop their coverage outright, scale back their plans'
benefits to conform to the new "standard plan" for Medicare, or
replace their plans with "wrap-around" coverage that pays the
initial deductible and cost-sharing for their retirees. In short,
they would shift much of the risk and the expense of prescription
drugs onto the taxpayer. A great deal for them -- but a terrible
one for seniors.
No wonder lawmakers
voted recently to exempt themselves from this legislation. They
don't want to lose the superior coverage they get through the
Federal Employees Health Benefit Program, which offers them a
choice of competing private plans. Apparently, though, it's too
good for the rest of us.
Most Americans agree
we don't want poor seniors eating Purina Cat Chow so they can
afford their prescriptions. But most also want a plan with
predictable and reasonable costs that serves those who need it most
and doesn't interfere with the large number of seniors who can get
their drugs through private insurance.
In other words,
something that won't make the problem worse.
Lanhee Chen is the
Winnie Neubauer visiting fellow in health policy studies at The
Distributed nationally on the Scripps-Howard wire
About three out of every four seniors eligible for Medicare have some form of drug coverage, many through their former employers. They get their drugs for a small co-pay, usually $10 or less per prescription or a minimal annual fee
Lanhee Chen, Ph.D.
Read More >>
Heritage's daily Morning Bell e-mail keeps you updated on the ongoing policy battles in Washington and around the country.
The subscription is free and delivers you the latest conservative policy perspectives on the news each weekday--straight from Heritage experts.
The Morning Bell is your daily wake-up call offering a fresh, conservative analysis of the news.
More than 450,000 Americans rely on Heritage's Morning Bell to stay up to date on the policy battles that affect them.
Rush Limbaugh says "The Heritage Foundation's Morning Bell is just terrific!"
Rep. Peter Roskam (R-IL) says it's "a great way to start the day for any conservative who wants to get America back on track."
Sign up to start your free subscription today!
The Heritage Foundation is the nation’s most broadly supported public policy research institute, with hundreds of thousands of individual, foundation and corporate donors. Heritage, founded in February 1973, has a staff of 275 and an annual expense budget of $82.4 million.
Our mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense. Read More
© 2014, The Heritage Foundation Conservative policy research since 1973