Congress appears poised this year to pass a prescription-drug benefit for seniors as part of an overall Medicare reform package, but the new entitlement could put serious financial pressure on younger taxpayers and the U.S. Treasury for decades to come, say analysts.
“With the support of the Bush administration, or at least with the White House’s passive acquiescence, Congress appears on course to enacting a huge new entitlement aimed at middle-income Americans,” writes Stuart M. Butler, Ph.D., vice president of Domestic and Economic Policy Studies at the Heritage Foundation, a Washington, D.C.-based think tank.
“And as President Clinton’s Medicare administrator puts it, ‘In signing it, as he will surely be forced to do, he will preside over the biggest expansion of government health benefits since the Great Society,'” Butler said.
Under plans being considered by the House and Senate, generally speaking the government would give subsidies to private insurers to offer prescription-drug coverage to Medicare patients, according to the National Center for Policy Analysis, or NCPA. “Although the details are not fixed, it is expected that a policy would cost a retiree about $35 a month on top of current Medicare premiums,” the center said.
The plans also incorporate deductibles, but would cover the entire cost of drugs after seniors spent so much per year.
Advocacy groups for senior citizens say the time is right to add a prescription-drug benefit to Medicare. They say they’ve fought for the entitlement for more than a decade, but it is vital now as costs for medicine continues to climb.
“It’s been about 10 years that we’ve been fighting for this and that. Seniors have been asking for it,” William Novelli, CEO of AARP – formerly known as the American Association of Retired Persons – told CNN.
“Over the next decade, health experts predict, seniors will need $1.6 trillion worth of prescription drugs,” says the NCPA.
Also, say political analysts, timing has much to do with the Bush administration’s support for a prescription-drug benefit. Reports CNN’s political analyst Bill Schneider, Bush had been getting solid re-election support from non-seniors, but his support among Medicare-aged voters falls to single digits.
Deciding the issue in the White House didn’t come without trial balloons. In January, Bush promised to get a benefit to seniors if they chose a private insurance plan. But most didn’t want to – and the poll numbers remained unchanged – so last week, Schneider wrote, Bush gave way and agreed to provide the benefit for seniors in Medicare and in private plans.
That decision caused much consternation among fiscal and social conservatives who worry about the ballooning cost of medical care.
The plan under consideration in Congress is estimated at $400 billion over 10 years, but as Butler says, that figure is more guesswork than established fact.
“Congressional proponents of the legislation maintain that the new drug benefit will cost $400 billion over the next 10 years. This of course is merely a guess. Since the program is an entitlement, there is no fixed budget,” he said.
Says AARP’s Novelli, “We have had a long, continuous dialogue with our members on this issue. We have listened to them and have a clear understanding of what they need. Here’s what they tell us they need: Access to coverage for everyone in Medicare; affordable out-of-pocket costs; gaps in coverage kept to an absolute minimum; reasonable and affordable cost sharing; [and] protection from continuing rises in already-high drug costs.”
Those are lofty goals, say critics, but they’re too expensive to maintain.
“The evidence from both the private and public sectors in recent years suggests that future costs are likely to exceed projections,” says Butler. “But even if they are accurate, it is not the next 10 years that matter. It is the years after that when the full force of the Baby Boom generation hits Medicare and Social Security. Within 15 years, Medicare already faces a Niagara Falls of red ink. Adding a drug benefit without serious reforms and constraints on future spending means massive tax burdens on generations to come.”
And, as WorldNetDaily previously reported, David Walker, comptroller general of the United States, has said Medicare is unsustainable because its financial outlook is bleak.
“Without meaningful reform, the long-term financial outlook for Medicare is bleak. … When viewed from the perspective of the entire budget and the economy, the growth in Medicare spending will become progressively unsustainable over the longer term,” he said in an April 7, 2002, report.
By 2030, warns Walker, Social Security, Medicare and Medicaid will consume more than three-quarters of total federal revenue – without outpatient prescription-drug coverage.
Also, warns the NCPA, “total Medicare spending will double to 5 percent of gross domestic product by 2035 and grow to 8 percent of GDP in 2075.” Meanwhile, the center says, “in 2016 … Social Security outlays are expected to exceed tax revenues, [and] Medicare hospital outlays will exceed payroll tax revenues.”
Without reform, Walker predicted, “sometime during the 2040s government would do nothing but mail checks to the elderly and their health-care providers.”
A separate Office of Management and Budget report warned that “despite the enormous revenue flows into Social Security and Medicare, totaling $729 billion in 2002, these programs are going to spiral out of control.”
“Americans have often heard that Social Security and Medicare are in deep trouble financially, and the simple reason is that the benefits promised under these programs will soon far outstrip their dedicated revenues,” the report said. “Over the long term, the actuaries of the Social Security Administration project that the cost of all benefits paid to current beneficiaries and promised to future retirees exceed Social Security revenues by almost $5 trillion. The Medicare shortfall is even worse at more than $13 trillion.”
One physician advocacy group is offering a bold solution to its members: Abandon Medicare altogether.
“Medicare endangers seniors, rations care and punishes the best doctors whose only aim is to give the best care. For the sake of patients and integrity of the profession, doctors should get out of Medicare,” says an Aug. 24, 2000, policy statement published by the American Association of Physicians and Surgeons.
“Medicare sentences seniors to lousy care, delayed care or even death,” said Dr. Jane M. Orient, AAPS executive director. “Doctors should refuse to be willing participants in this game of regulatory Russian roulette.”
Some advocacy groups say free-market solutions would not only truly reform Medicare, but would benefit health care as a whole.
“Health insurance policies with higher deductibles offer people the chance to combine relatively inexpensive higher deductible health insurance policies with federally authorized medical savings accounts that would be accepted by preferred provider organizations,” says a policy paper by the Colorado-based Independence Institute.
“Medical savings accounts work like IRAs. People make tax-free deposits each year and withdraw funds as needed to pay for medical care not covered by their insurance policy,” said the policy statement. “Excess deposits remain in the account where they compound tax-free for future use. Allowable medical expenses are defined by IRS rules, which are far more liberal than those used by insurers.”
Butler says the issue is too politicized for responsible action.
“The process [of getting a prescription-drug bill] is fast becoming a political feeding frenzy, in which short-term partisan advantage trumps responsible action,” he writes. “While today’s politicians may reap the benefits, it is future generations who will have to pay for this unforgivable failure of leadership.”
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