September 30, 2005

September 30, 2005 | Commentary on Health Care

Delay or Cancel the Medicare Drug Benefit

Real leadership is never easy. So it deserves to be recognized.

That's why we ought to congratulate the Republican Study Committee and House Minority Leader Nancy Pelosi, D-Calif., for stepping forward and offering to help pay for Hurricane Katrina reconstruction by returning the federal money they won for highway and byway projects in their districts -- projects tucked away in the latest highway bill.

Unfortunately, even if all their colleagues go along with the current challenge to turn back half their transportation "earmarks," or special projects, that will raise only $25 billion. Congress already has appropriated $62 billion for Katrina relief, and some observers expect the final tab will exceed $200 billion.

Clearly, we'll have to trim much more from the federal budget if we are to even come close to offsetting the rising cost of fixing the Gulf Coast. Failure to offset this massive spending increase will lead only to a still-larger deficit, which would crowd out other worthy priorities and lead us to borrow more from undependable foreign markets.

All the more reason to consider a bold idea floated by Sen. John McCain, R-Ariz., and others: Cancel, or at least delay, implementing the huge Medicare drug entitlement set to take effect on Jan. 1.

McCain, wisely enough, says we should abandon the Medicare drug program altogether and go back to the drawing board and design a rational and responsible drug benefit. But even the RSC's more modest suggestion to delay its implementation for a year is a big step in the right direction.

According to the Bush administration, the drug benefit is projected to cost $37.4 billion next year alone, the first down payment on a massive entitlement that will add $8.7 trillion to the long-term debt of Medicare. A simple delay would yield big savings.

Some painful choices will have to be made for the hurricane-rebuilding projects. But a delay in a drug program that doesn't yet even exist isn't one of them. Roughly three out of four seniors already have some form of drug coverage. Congress should help the minority who are too poor to buy private drug coverage, are ineligible for Medicaid or aren't covered by their former employers. And the new Medicare drug-discount cards, which already have provided big savings for millions of seniors, could be the way to deliver direct help to poor seniors who need it.

Moreover, the intended beneficiaries of the drug benefit aren't exactly clamoring for it. Recent surveys show that about a third of seniors have a favorable impression of the benefit; about a third have an unfavorable impression; and about a third are neutral or don't know enough to form an opinion.

And why should seniors be enthusiastic about such a program? Many of those already covered by former employers will have their coverage either scaled back to a minimum standard established by Congress or dropped altogether. Because taxpayers will be picking up the tab, the non-partisan Congressional Budget Office estimates that 2.7 million seniors will be moved out of their existing private coverage next year. Some estimate that still more seniors will be forced into the program after that, and virtually all analysts agree the program will accelerate the decline of private, employer-based coverage.

And the 6.4 million poor seniors whose drugs are covered under Medicaid, of course, will be required to enter the Medicare drug program, regardless of their personal wishes.

To make matters worse, many of those forced into the Medicare drug program will, within the year, learn first-hand of its infamous "doughnut hole." That's the big gap in coverage that forces some high-cost beneficiaries to pay 100 percent of their drug bills until they spend $3,600 out of pocket. Given escalating drug costs for the sickest seniors and the way the bill is designed, the Kaiser Family Foundation estimates that 6.9 million seniors will fall into the doughnut hole in 2006. That process will be repeated each year.

In other words, next year we'll have a costly new government program that few want before it's implemented and fewer will like after it's implemented. We also have an immediate and extreme need to free up some funds for hurricane victims in desperate need of relief. We have the chance to re-allocate tens of billions of dollars from a bad idea to a necessary effort.

So how about it, Congress? Why not cancel the drug entitlement and target assistance to those who need the most help? If not, how about at least delaying its implementation and continuing aid to seniors who need it most through a juiced-up Medicare discount-card program?

Nobody disputes the urgency of helping poor seniors get the drugs they need. In either case, Congress needs to take another crack at designing a Medicare drug benefit that's rational, responsible and affordable.

Robert Moffit is director of the director of the Center for Health Policy Studies at the Heritage Foundation.

About the Author

Robert E. Moffit, Ph.D. Senior Fellow
Center for Health Policy Studies

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