July 24, 2003

July 24, 2003 | Commentary on Health Care

The Medicare Mess Contains No Reform

How ironic that some senators recently killed a bill that would have limited damage awards in medical malpractice lawsuits. Because once people get a good look at the prescription-drug benefit Congress is preparing for them, they'll probably feel like suing.

 

It didn't have to be this way, of course. Groups such as my Heritage Foundation have been warning lawmakers for years that the Great Society-era program is racing pell-mell toward a financial and demographic cliff.

 

Once the 77-million Baby Boom generation starts retiring in a few years, the program will start running steep deficits. Unless we're willing to cut benefits or raise taxes -- or both -- it's only a matter of time before Medicare runs out of money entirely.

 

So when certain lawmakers began talking about the need for Medicare to provide a prescription-drug benefit for seniors, we sent out a clear message: By all means, do so -- but not without approving a serious and fundamental reform that would put the program on a firm financial footing. To simply add a drug benefit to the program -- in short, to hasten the day of financial reckoning -- would be lunacy.

 

Well, welcome to the asylum. Because that's what Congress is doing.

 

Why? Fewer than one out of every four seniors lack drug coverage. Congressional leaders could have written a bill narrowly tailored to help them -- one that allowed the 78 percent of seniors that have drug coverage now to keep it.

 

Instead they slapped together legislation that features gaping holes and enormous consequences, and then raced to vote on it. Thanks to the Congressional Budget Office, we know one fruit of that haste: Under the legislation, about one out of every three retirees with employer-sponsored coverage could lose it and instead be thrown into the Medicare "safety net."

 

Why would that happen? Simple: Employers will quickly realize how much they can save by cutting retirees loose from their health plans. In fact, some already have: The Wall Street Journal recently reported that General Motors has done an internal analysis showing that GM would save $1.4 billion by dropping retiree coverage.

 

Yet lawmakers from both parties don't seem very worried. Maybe that's because the legislation won't take effect until 2006. By then, most people likely won't remember who voted for what back in the summer of '03.

 

But by the time the legislation does take effect, members are likely to wish they had taken more time with it. Take the $400 billion, 10-year price tag. If past experience is any guide, that amount will wind up as a floor, not a ceiling. That's what happened in 1988, the last time Congress tried to add a drug benefit to Medicare: The CBO said it would cost $5.7 billion over five years. A year later, it more than doubled the estimate, to $11.8 billion.

 

But even if we could somehow afford this drug benefit, it would hardly be worth the money. Under the Senate plan, 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. None of this makes any sense -- until you realize that such contortions are necessary to stay within the agreed-upon $400-billion limit.

 

The most charitable explanation for this mess is that Congress doesn't know what it's doing. The Senate version, after all, featured more than 1,000 amendments. In order to speed the process, senators were allowed just two minutes of debate before voting on each amendment.

 

More likely, though, members do understand what they're doing. Otherwise, they'd be willing to sleep in the same bed they're making for others. But no: They've already voted to keep the drug coverage they get through the Federal Employees Health Benefits Program.

 

Either way, congressional leaders are squandering a historic opportunity to reform Medicare and help seniors who lack drug coverage. They're sacrificing long-term principle for short-term political gain. And they're being aided and abetted by a president who talks a good game on the principles of Medicare reform, then says he'll sign anything Congress puts in front of him. Talk about a troubling prescription.

 

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