February 17, 2004

February 17, 2004 | Commentary on Health Care

A Costly Prescription

Federal lawmakers faced almost unprecedented political pressure to support last year's legislative main event: adding a prescription drug benefit to the outmoded Medicare health program for our nation's seniors.

The pressure came not only from the highest levels of Congress and even the White House but eventually from the entire Washington system -- hundreds of sophisticated and resourceful lobbyists, trade associations, teams of public relations experts. It carried with it the full and formidable support of the AARP. It was the legislative equivalent of a D-Day operation, and it was a marvel to behold.

But despite all this pressure, enough lawmakers took a hard look at the legislation, contemplating whether it contained sufficient reforms and improvements to justify the largest expansion of a Great Society program ever, to turn the vote on final passage into a dramatic and extended staring contest. Eventually, after the House leadership held open the voting for an unprecedented three hours, it passed by two votes.

One wonders if it would have passed had lawmakers known then what they know now. Namely, that it won't cost $395 billion over the next decade as promised but closer to $534 billion, according to updated figures from the enthusiastic backers at the White House. Do we hear $600 billion? Or $700 billion?

Those of us who studied the progress of this legislation and who are acquainted with the pitiful track record of official government cost estimates for health programs weren't the least bit surprised by the revised numbers. We warned anyone who would listen that a bill that gives a blanket, government-designed benefit to every senior, regardless of need -- as opposed to helping bring targeted relief, provided through the private sector, to the 22 percent of seniors who have no drug coverage -- would prove unaffordable.

Medicare needs a makeover, particularly considering the Category 5 demographic hurricane headed its way in 2011 when the first of the 77 million baby boomers begin to retire. The problem could overwhelm the next generation, and the new law did nothing but make things worse.

Jagadeesh Gokhale of the American Enterprise Institute calculates that the new prescription drug benefit has escalated the cost of promised Social Security and Medicare benefits -- for which there is no funding source -- to more than $50 trillion. That's $60,000 of debt for every child born in America today.

No sweat, say some lawmakers. In fact, before the drug bill even passed, Sen. Edward M. Kennedy, a Massachusetts Democrat, called it merely a first step. "When we get this as a down payment," he told CNN, "we're going to come back again and again and again."

But some lawmakers were deeply disturbed.

New Hampshire Republican Sen. Judd Gregg said it was "incredibly unfair for one generation to use our political clout because we are in office to benefit" themselves at the expense of their children and grandchildren. He correctly labeled the new Medicare bill the "largest intergenerational tax increase in the history of this country" and predicted -- probably with equal accuracy -- that the new law will "cause our children and our children's children to have a lower quality of life than we have had."

In addition to the intergenerational fiscal consequences, the seniors who purportedly stand to gain the most may find the new law, ironically enough, stingy. Princeton University's Paul Starr observes that Medicare's new private prescription plans will cover only certain drugs in every category. "What," he asks, "if the drug you need falls outside the list? Too bad for you. Your expenses for those drugs won't even count toward meeting your cost-sharing requirement."

Pondering Medicare's quandary, Howard Gleckman of Business Week magazine speculates that "either seniors will have to pay lots more, taxes will rise, or care will have to be rationed." Sadly, the situation could become so dire that a future generation of policymakers may be tempted to consider the unthinkable: all three of those options.

About the Author

Michael Franc Distinguished Fellow
Government Studies

Related Issues: Health Care

First appeared in the Baltimore Sun.