June 16, 2005

June 16, 2005 | News Releases on Health Care

Analyst: Medicare Changes Will Crowd Out Seniors' Existing Drug Coverage

WASHINGTON, JUNE 16, 2005-The federal bureaucracy isn't known for acting swiftly, but it's racing to implement the Medicare prescription-drug entitlement. A new paper from The Heritage Foundation questions whether the government can administer the program within the tight timeframe set by Congress without disrupting the lives of millions of senior citizens.

On Jan. 1, the multi-billion-dollar drug benefit is scheduled to take effect. Before then, Heritage health-care expert Robert Moffit notes, state and federal employees, as well as Medicare beneficiaries, must meet several rapidly approaching deadlines. Bureaucrats must get educational information to beneficiaries by Oct. 15 and be prepared to enroll seniors by Nov. 15. For their part, seniors on Medicaid must enroll by Jan. 1, and all seniors must be signed up by next May 15.

Moffit says those congressional deadlines will be difficult to meet and that the confusion, plus disruption of existing coverage, will make many beneficiaries unhappy.  He urges Congress to spare seniors the disruptions and delay the program for at least a year. Meanwhile, lawmakers should try to figure out how they are going to finance the trillions of dollars in unfunded Medicare promises and craft a more rational and responsible drug program targeted to the minority of seniors without drug coverage, he says.

Leaders and staff of the Centers for Medicare and Medicaid Services (CMS), the agency that runs Medicare, are doing the best they can under the circumstances, Moffit says. "The problems have been created by Congress, which has insisted on central planning and government regulation to deliver medical services to patients, while crowding out existing drug coverage," he adds. "Lawmakers created a complex drug-benefit design that has no precedent in the private sector, and is pregnant with unintended consequences. The problem with government central planning is that you have to plan for every eventuality, but with a program of this scale and complexity, that's simply impossible."

Congress created several new problems in drafting the Medicare law. Instead of simply targeting assistance to those without drug coverage, it created a universal entitlement. But to control the costs of the plan, it created a gap in coverage called the "doughnut hole," where seniors would be required to pay 100 percent of their drug costs.

Next year, millions of seniors will fall into this hole, forcing them to pay thousands of dollars out of pocket. And many seniors who have drug coverage through their former employers will lose it and wind up in the inferior government program, as employers use the new benefit to scale back or drop their coverage altogether.

Plus, Moffit says, the new drug entitlement is generating a massive expansion in government regulation. Just five months ago, Medicare bureaucrats issued some 1,162 pages of regulations to govern it. Untangling those confusing regulations will pose a challenge for federal employees, state workers, medical providers and Medicare beneficiaries.

"The Medicare bureaucracy has historically been plagued by serious problems of management and governance," Moffit writes. "Congress is about to aggravate those problems by expanding the agency's already formidable regulatory reach."

Moffit says that there is no reason for Congress to insist on disrupting the existing coverage of millions of seniors and imposing massive costs on the taxpayers. He notes that three out of four seniors already have some form of drug coverage. "The responsible thing to do is to craft a rational drug benefit, and target generous help to seniors who lack drug coverage and save taxpayers tens of billions of dollars at the same time," he says.

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