July 9, 2003

July 9, 2003 | Commentary on Health Care

Saving Medicare

Congress has passed "historic legislation" that will "strengthen" Medicare, President Bush said in a recent radio address. It's historic, all right, but don't expect it to do much strengthening. Indeed, our elected officials are racing to grab a short-term political advantage -- and, in the process, making a long-term mistake.

 

The Congressional Budget Office estimates that spending on Medicare will more than double over the next three decades, jumping from 2.3 percent to 5.4 percent of the nation's gross domestic product. That makes sense; as the baby boomers retire, the number of people on the program is also expected to double over the next 30 years.

 

Medicare trustees have repeatedly warned Congress that the program's financial difficulties are severe. In 2002, the trustees urged "effective and decisive action" to reinforce the very limited reform measures enacted by Congress.

 

So what are lawmakers doing to solve this looming financial crisis? Instead of drawing up an effective plan for reform, they've passed a bill that would slap a massive prescription drug benefit on to the struggling program. They claim it would cost "only" $400 billion over the next decade. That's certainly a low guess. After all, the last time Congress tried to reform Medicare, the CBO's estimated cost of the drug benefit doubled in just one year, from $5.7 billion when the bill passed in 1988 to $11.8 billion.

 

Nevertheless, both houses of Congress have passed bad legislation -- and President Bush has indicated he will sign whatever lawmakers put in front of him.

 

From a purely political point of view, that makes sense. It allows lawmakers and the president to face voters in 2004 and declare they've provided prescription drugs to seniors. Since the bill doesn't take effect until 2006, no one will know how bad it's going to be until well after the next two election cycles. In other words, it makes a short-term problem go away.

 

But let's consider the long-term effects.

 

The CBO estimates that, under the Senate version of the bill, more than a third of all seniors would lose their private drug coverage and be forced to enter the government plan. It would also encourage many companies, which are now providing prescription drug plans to their retired employees, to drop those plans. After all, if the government is going to pick up the tab, why should private businesses?

 

And the government is going to pick up the tab. The bill would provide an equal benefit to all seniors, regardless of income or need. That means that retired multi-millionaires would get the same benefit as widows and retired social workers. That's an extravagance we simply cannot afford. Real reform will help the truly needy, without creating an open-ended entitlement.

 

Today, about three-quarters of seniors have some form of prescription drug coverage, either through a former employer or with a supplemental policy they've purchased. Any reform measure must give those seniors the option of keeping their current coverage.

 

President Bush's initial outline provided for such real reform, along the lines of the Federal Employees Health Benefits Program, the same program that covers lawmakers and their staff. FEHBP includes a number of private plans, and they all offer drug benefits. The wide variety of plans means seniors could choose an expensive plan with a gold-plated drug benefit, or a more basic (and less costly) plan with a smaller benefit.

 

But the president never drafted a complete proposal, and he has failed to fight for his original outline. If he had taken as active an interest in Medicare reform as he did in his recent tax cut, real reform could have sailed through Congress.

 

Instead, he's indicated he'll sign whatever plan Congress crafts. He's made that mistake before. That's what led him to sign the farm bill (which brought back wasteful subsidies for wealthy farmers and will end up costing taxpayers hundreds of billions of dollars) and a campaign finance reform bill that President Bush himself admitted contained unconstitutional elements.

 

This lack of leadership encouraged Congress to pass a fatally flawed Medicare reform bill that does nothing more than create a massive new entitlement within an already financially struggling program. If he has the courage of his conservative convictions, President Bush should veto it and insist that Congress start over.

 

Lawmakers should provide a prescription drug benefit, but only as one part of real Medicare reform. Our elected officials owe that to all of us, and to our children and grandchildren. After all, they're the ones who will end up paying the bills tomorrow if we make the wrong choices today.

 

Ed Feulner is the president of The Heritage Foundation.

About the Author

Edwin J. Feulner, Ph.D. Founder, Chairman of the Asian Studies Center, and Chung Ju-yung Fellow
Founder's Office

Related Issues: Health Care

Originally appeared in The Washington Times