July 31, 2003

July 31, 2003 | Commentary on Health Care

Higher Taxes Lurk at the End of This "Rainbow"

In "The Prince and the Pauper," Mark Twain wrote of a man who "danced blithely out to enjoy a rainbow and got struck by lighting." If Congress has its way, my generation, the future taxpayers of America, could become the next such victims.

 

The Prescription Drug and Medicare Improvement Act of 2003 promises a rainbow to seniors buried under high drug costs. As a college student about to enter the work force, I worry about the lightning bolt of higher taxes the legislation could bring and wonder if our voices are being heard.

 

Congress proposes to add prescription-drug coverage to Medicare. This means all Medicare patients would be eligible, regardless of income or whether they have coverage now. In other words, my tax dollars eventually will go to lower drug costs for Bill Gates.

 

Moreover, what's being proposed is hardly a good deal for our grandparents and other seniors. The plan calls for a $35 monthly premium and a $275 deductible. Once patients reach the $275, the government covers half their drug costs up to $4,500 worth of bills. From that point, the plan pays nothing until out-of-pocket expenses have reached $3,700. From then on, it pays 90 percent of the cost.

 

Those who get stuck with such oddly configured coverage, though, are the lucky ones. According to the Congressional Budget Office, about one out of every three seniors with private drug coverage now will lose it. Some "benefit."

 

But, being several decades from retirement, what concerns me is the cost. Get this wrong -- or say nothing and let Congress get it wrong with no input from those of us who will foot the bill -- and we could bury ourselves under an avalanche of taxes for our entire careers.

 

Even without the prescription-drug package, Medicare's condition is critical. The Congressional Budget Office estimates we will need to raise taxes by as much as a third by 2025 just to maintain current Medicare demands. Payroll taxes, now at 15.5 percent, will have to double. The number of people on Medicare is expected to jump dramatically over the next 30 years, as the 77-million baby boom generation retires.

 

Now we want to add a drug benefit. And aside from some rough and politically convenient estimates, no one can even say what it will cost.

 

Congress and the White House agreed to spend $400 billion over the next 10 years to establish the program. That explains the strange gaps in coverage outlined above -- the program had to be designed that way to stay within the cost constraints.

 

But all saw that as just an ante. Once consumers discover those strange gaps, and once their numbers become bolstered by the retirement of the baby boomers -- which commences in 2011 -- Congress will have to "fix" the program. By then, we could be looking at $1 trillion over the first 10 years. And it's taxpayers like me who will get stuck with the bill.

 

Considering that nearly four out of every five seniors have some form of private health coverage, why must we attach this to Medicare -- which makes everyone eligible -- and not settle for something smaller that would help those most in need? Why this huge one-size-fits-nobody program?

 

Let's go back to what President Bush originally proposed, a program modeled on the Federal Employees Health Benefits Program (FEHBP), which serves 9 million federal employees and retirees and their families. In the federal program, insurers agree to offer a core set of benefits, plus whatever add-ons they wish to sell. Federal workers choose from among 12 to 20 plans the one that best suits their needs. Re-enroll and satisfaction rates are extremely high because the program offers what Medicare doesn't -- flexibility, responsiveness and quality -- at prices customers are willing to pay.

If lawmakers would go back to the drawing board and come up with an FEHBP-like program, everyone would win -- seniors who will wind up with inferior coverage (or no coverage) under the current proposal and those of us preparing to enter the work force. If not, we'll be paying -- a lot -- for as long as we earn money.

 

It's crucial for young people to shake off the political apathy that causes lawmakers to ignore them in favor of seniors, who are far more likely to vote. As long as we look the other way, Congress is only too happy to run up a tab we'll be forced to pay. Are we willing to let that happen?

 

We shouldn't. Because when lightning strikes, all thoughts of rainbows disappear.

 

Katie Jackson, a senior at Patrick Henry College in Purcellville, Va., is a summer 2003 intern at The Heritage Foundation.

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