01 Jun 2003 Talking Points on Health Care #22: A Medicare Drug Benefit: If Its Important Enough to Do, It’s Important Enough to Do Properly

A June 18-21, 2003 Zogby International poll measuring the opinions of seniors about then Medicare prescription drug plan then under debate in the Senate, 74% of seniors with drug coverage said it would not be an improvement on their current prescription drug coverage while 16% said it would be better. Of seniors without prescription drug coverage, the poll revealed, only 16% said they would be “very likely” to sign up for the new policy.1

Health care experts at the Heritage Foundation call the legislation an “impending disaster.”2 The fast-tracked proposal would cost at least $400 billion over ten years; will end much of the employer-based drug coverage 34 percent of all seniors now enjoy;3 will cause poor Americans to subsidize rich Americans and, as its actual price tag is unknown but astronomical, will lurch Medicare into insolvency years ahead of predictions and possibly lead to drug rationing.4

The $400 billion projected cost estimate is most likely deceptively low. When Medicare was instituted in 1965, it was estimated that the cost of Medicare Part A would be $9 billion by 1990. Instead, it was $67 billion — seven times higher.5

The Concord Coalition’s Richard Jackson has noted that, in 1987, Medicaid’s special hospitals subsidy was projected to cost $100 million annually by 1992, but the actual cost by then — a mere five years later — was almost three times that, $11 billion. Likewise, in 1988, when Medicare’s home care benefit was established, the projected cost for 1993 was $4 billion, but the actual cost in 1993 was $10 billion — more than twice the estimate.6

Congress’ Joint Economic Committee reports that — if unreformed — over the next several decades, Medicare costs will double relative to the cost of the economy — from 2 percent GDP today to 4 percent in 2025, and then double again by 2075. A prescription drug benefit added to an unreformed Medicare program will add substantially to this burden.7

Congress is right to take a hard look at Medicare, and correct to consider adopting a prescription drug benefit within Medicare for low-income seniors who need it. But Medicare’s archaic structure isn’t workable for the 21st Century. Thorough modernization — including the option of multiple private insurance program choices for seniors within Medicare — is needed. This will assure quality health care for seniors while, by introducing competition, inserting a mechanism to help keep future costs under control.

Footnote:

1 “What Seniors Want, ” Editorial, Wall Street Journal, June 26, 2003, available at http://online.wsj.com/article/0,,SB105658282797702000,00.html?mod=opinion%5Fmain%5Freview%5Fand%5Foutlooks as of June 26, 2003.

2 Stuart M. Butler, Ph.D., “The Medicare Drug Bill: An Impending Disaster for all Americans,” WebMemo #293, The Heritage Foundation, Washington, D.C., June 13, 2003, available at http://www.heritage.org/Research/HealthCare/wm293.cfm as of June 19, 2003.

3 Robert E. Moffit, Ph.D., “What’s Wrong with the Senate Drug Bill,” WebMemo #297, The Heritage Foundation, Washington, D.C., June 18, 2003, available at http://www.heritage.org/Research/HealthCare/wm297.cfm#_ftn4 as of June 19, 2003.

4 Ibid.

5 Stephen Dinan, “Entitlements Have a History of Cost Overruns,” Washington Times, June 16, 2006, available at http://dynamic.washtimes.com/print_story.cfm?StoryID=20030625-115757-6676r as of June 26, 2003.

6 Ibid.

7 “Prescription Drugs Are Only One Reason Why Medicare Needs Reform,” Senate Joint Economic Committee, June 17, 2003 (PDF File)