September 22, 2005
By Robert E. Moffit, Ph.D.
Katrina relief and
recovery could cost taxpayers hundreds of billions of dollars in
additional spending, driving up deficits, but still the costly new
Medicare drug entitlement is scheduled to go into effect on January
1, 2006. Sen. John McCain (R-AZ) says that, in light of Katrina,
America's taxpayers cannot afford this massive and unnecessary
Medicare entitlement expansion next year.
Meanwhile, members of the House Republican Study Committee have
proposed a one-year delay of the benefit to offset rapidly rising
Katrina-related costs. Delaying the prescription drug benefit for
one or two years would save tens of billions of dollars that could
be put to better use in Katrina recovery.
Title I of the
Medicare Modernization Act of 2003 is projected to cost $37.4
billion in 2006 and $52.5 billion in 2007 alone.
Moreover, according to the Medicare Trustees, the Act's universal
entitlement to prescription drugs within Medicare will add a
staggering $8.7 trillion to Medicare's long-term total unfunded
liabilities, or nearly 30 percent of Medicare's total long-term
debt of $29.7 trillion.
This will crowd out other federal spending priorities and impose
enormous burdens on current and future taxpayers.
While some in
Congress would like to expand the drug entitlement further,
worsening the financial condition of the program and adding even
more crushing debt, responsible Members of Congress realize that
rapidly expanding entitlements must be addressed sooner rather than
later. As the universal entitlement is simply unaffordable, it
should be struck or delayed and funds should be targeted to the
minority of senior citizens who do not have or cannot afford
prescription drug coverage.
Focusing on Need
The hundreds of
thousands of Americans whose lives have been upended by Katrina are
in desperate need, and providing effective relief is urgent. In
contrast, moving forward in 2006 with a massive Medicare
entitlement expansion, much of which will subsidize wealthy and
middle-class retirees at the expense of young working families, is
neither noble nor necessary. Congress needs to revisit the Medicare
drug bill because:
America must help
the victims of Hurricane Katrina rebuild their lives and their
region, which is a vital part of the nation. This is an urgent
necessity. Because the cost will be enormous, Congress must find
ways to offset current and projected spending.
Title I of the
Medicare Modernization Act of 2003, the universal drug entitlement,
is neither necessary nor desirable. The best policy is to repeal
most of Title I but retain the Medicare drug discount card and its
provision for assistance for low-income seniors. Congress could
make this direct assistance even more generous for poor seniors
without drug coverage, while going back to the drawing board to
create a more rational and fiscally responsible drug Medicare
benefit. A redrawn benefit should target increasingly limited
taxpayers dollars to those seniors who need help the most.
Short of repeal of
Title I, Congress could delay implementation of the Medicare drug
provisions for one or preferably two years. Again, Congress could
still retain the Medicare drug discount card and continue to use it
to target direct assistance to needy seniors who lack prescription
drug coverage. The Medicaid dual-eligible population would remain
in Medicaid for prescription drug coverage during any period of
delay. This, in substance, is the policy embodied in The
Prescription Drug Cost Containment Act of 2005 (H.R. 1382),
authored by Rep. Jeff Flake (R-AZ).
estimates of the cost to respond to Hurricane Katrina, Congress
must carefully balance its spending priorities, such as providing
funds for disaster relief and reconstruction while helping seniors
in need afford prescription drugs. Allowing the massive Medicare
prescription drug benefit to go into effect would directly undercut
these goals. Congress should delay the universal benefit and focus
on the less costly alternative of targeting aid to those who need
Haislmaier, "Weird Science: Projecting The Effects of Medicare's
Odd Drug Benefit Design," Heritage Foundation WebMemo No.
674, March 3, 2005, at http://www.heritage.org/research/healthcare/wm674.cfm.
Derek Hunter, "Medicare Drug Cost
Estimates: What Congress Knows Now," Heritage Foundation
Backgrounder No. 1849, April 28, 2005, at www.heritage.org/research/healthcare/bg1849.cfm.
Robert E. Moffit,
"High Anxiety: Implementing The Medicare Prescription Drug
Program," Heritage Foundation Backgrounder No. 1860, June 14, 2005,
Robert E. Moffit,
Ph.D., is Director of the
Center for Health Policy Studies at The Heritage
"McCain Says Ditch Prescription Drug Benefit," White House
Bulletin, September 20, 2005.
Based on February 2005 CMS estimates. See Derek Hunter, "Medicare
Drug Cost Estimates: What Congress Knows Now," Heritage Foundation
Backgrounder No. 1849, April 28, 2005, at http://www.heritage.org/research/healthcare/bg1849.cfm.
For an account of the Medicare drug bill's implementation problems,
see Robert E. Moffit, "High Anxiety: Implementing The Medicare
Prescription Drug Program," Heritage Foundation Backgrounder
No. 1860, June 14, 2005, at http://www.heritage.org/research/healthcare/bg1860.cfm.
Ibid. at p. 3.
On this point, see Edmund F. Haislmaier, "Weird Science: Projecting
The Effects of Medicare's Odd Drug Benefit Design," Heritage
Foundation WebMemo No. 674, March 3, 2005, at http://www.heritage.org/research/healthcare/wm674.cfm.
The Henry J. Kaiser Family Foundation, "Views on The Medicare
Prescription Drug Benefit," (August 2005). Over a two-year period,
there has been a steady decline in the drug benefit's "unfavorable"
ratings and a slight increase in the numbers of seniors who have a
"favorable" view. However, it has not generated the kind of popular
support its congressional advocates had anticipated. The latest
data was compiled from the Kaiser Family Foundation Health Poll
Report Survey, conducted August 4-8, 2005.
For an account of the rise and fall of the Medicare Catastrophic
Coverage Act, see Robert E. Moffit, "The Last Time Congress
Reformed Health Care: A Lawmaker's Guide to the Medicare
Catastrophic Debacle," Heritage Foundation Backgrounder No.
996, August 4, 1994.
Delaying the drug benefit would save tens of billions of dollarsthat could be put to better use in Katrina recovery.
Robert E. Moffit, Ph.D.
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