Medicare Part "D" For "Disaster"

COMMENTARY Health Care Reform

Medicare Part "D" For "Disaster"

Feb 10th, 2006 3 min read

Former Visiting Fellow

Andrew served as a Visiting Fellow.

A rare bit of good news recently trickled out about Medicare's new prescription-drug entitlement. The entitlement will cost $678 billion over 10 years, rather than the $737 billion previously projected.

The reason for this "savings"? It's partly that fewer seniors have signed up for the entitlement than the 33 million the government expected. And out of the 24 million now enrolled, only 3.6 million actually "signed up" -- the rest had no choice.

But this shortfall is really no surprise. So far, the program has been a disaster.

"Pharmacists decry Medicare chaos," blared a recent headline in the Daily Tennessean. The article beneath it is typical of those published in the days after the new entitlement took effect: pharmacists spending hours on hold with the government only to be cut off, seniors having to pay thousands more than expected for their prescriptions, and some even going without drugs.

Those seniors who have suffered most are the so-called "dual eligibles," needy seniors who had previously received drug coverage under their states' Medicaid programs. They had no choice: On Jan. 1, they were dumped into the Medicare drug entitlement.

The Tennessean reports that this has been "an out-and-out catastrophe for the poor." As an advocate for seniors told The New York Times, "All this is doing is harming the people who had coverage -- America's most vulnerable citizens."

With all these horror stories in the press, better-off seniors, who can choose whether to join the new entitlement, have avoided signing up. Thus, the savings.

The rest of the savings come from the part of the entitlement that's been most maligned by its political opponents. Because the entitlement relies on the market and insurance companies to provide drug benefits, instead of the government, competition has driven premiums 20 percent lower than expected.

That's the good news. The bad news is that all this chaos, suffering and catastrophe were predictable. Indeed, Robert Moffit of The Heritage Foundation predicted it in a policy paper published last June:

"Millions of seniors will lose their existing drug coverage, have their existing coverage degraded, or find themselves struggling with congressionally engineered gaps in drug coverage. Many who find themselves in these gaps will be among the sickest and most vulnerable members of the Medicare population."

That Heritage paper concluded that the new entitlement is a "massive new experiment in central planning." As the world should have learned well over the past century, central planning doesn't work.

This mess was avoidable. Back in 2003, when Congress began work on the drug entitlement, it started with a real problem: Some seniors couldn't afford to pay for prescription drugs, harming their health and ultimately driving up the cost of Medicare.

The obvious solution was to target aid to only those seniors unable to afford drug coverage. Most seniors already have it (often through their former employers), and this coverage tends to be more generous than what Medicare offers. The neediest seniors, along with many seniors in nursing homes, already received drug coverage through Medicaid. This left a narrow group of seniors who couldn't afford coverage and weren't already receiving it from Medicaid. Congress could have reached them with a simple direct subsidy.

Instead, Congress created a universal entitlement for every senior in the country. The cost is massive -- even with the latest savings, $678 billion over 10 years isn't exactly peanuts -- and the program may never work right. By all appearances, the drug benefit passed in 2003 is so unwieldy and complicated that the Medicare bureaucracy can't safely administer it.

And the worst is yet to come. While the initial kinks may be ironed out eventually, without substantial reform, the massive drug entitlement will never work efficiently. Meanwhile, more retirees will be dumped into the entitlement as their former employers use it as an excuse to discontinue their drug coverage. And as the year progresses, seniors will fall into the entitlement's notorious "doughnut hole," where they must pay for all drugs out-of-pocket -- as if they had no coverage at all.

Ironically, the failure of the drug entitlement has emboldened those who seek a larger role for government in health care. Psychologists describe this kind of response as "cognitive dissonance," when a belief is often held so firmly no contrary evidence can budge it. Judging by the amount of time members of Congress and the administration have spent touting the new entitlement, almost all of Washington suffers from this disorder.

Andrew M. Grossman is a senior Web editor at The Heritage Foundation (, a Washington-based public policy research institute.

Distributed nationally on the Knight-Ridder Tribune wire

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