September 22, 2005 | WebMemo on Health Care
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).
With soaring 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 it.
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.
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, at http://www.heritage.org/research/healthcare/bg1860.cfm.
Robert E. Moffit, Ph.D., is Director of the Center for Health Policy Studies at The Heritage Foundation.
 "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.