Grandma's Bad Drug Deal
By: Unknown Author
Wall Street Journal, June 25, 2002
We'd just as soon leave Dan Rostenkowski alone in
retirement. But it's too bad GOP House Ways and Means Chairman Bill Thomas
didn't think about his Democratic predecessor while crafting the Medicare
prescription drug benefit he was planning to bring to the House floor as
we went to press last night.
Mr. Rostenskowski, you'll recall, was chased by angry
seniors in the late 1980s after passing catastrophic health coverage, the
first entitlement they were ever asked to pay for. The outcry was such
that Congress actually repealed it.
But memories are short on Capitol Hill, where both
parties are now engaged in a bidding war over another entitlement seniors
probably won't like when they see it. The Republican plan sports a 10-year
cost estimate well above what Al Gore dared propose during the 2000
campaign, and would be the biggest expansion of Medicare since its
creation in 1965. Democratic plans would run as high as $800 billion.
We'd like to say something nice about the $350
billion GOP proposal, which at least attempts to harness market forces to
control costs and raises funding for reform demonstration projects like
the Medicare Plus Choice program. But the drug benefit itself looks so
lousy that Mr. Thomas and his House friends may want to save time and tape
"Kick Me" signs on their backs for seniors to follow.
Seniors would pay a $250 annual deductible and a $33
dollar monthly premium; they'd also pay 20% of drug costs up to $1,000,
and 50% between $1,000 and $2,000. Coverage would then stop, unless yearly
out-of-pocket expenses reach $3,700, after which the government would pay
everything.
The House Democratic proposal is more
"generous," if you believe in fiscal miracles. It would cover
all expenses after $2,000, with a $100 deductible, $25 monthly premium and
a 20% co-pay. Democrats admit to the preposterous 10-year price tag of
$800 billion, which is of course understated. Senate Democrats ($500
billion over seven years) are offering a $25-a-month plan with no
deductible and fixed drug prices -- $10 for generics, $40 for brand names
and $60 for "non-preferred" drugs -- up to $4,000, after which
the government pays everything.
The Republican plan appears a political loser: more
complicated and less generous, but not fundamentally different from what
Democrats are offering. Democrats are already demagoguing the GOP coverage
"gap" or "doughnut," while calling it the "first
step in a Republican plan to privatize Medicare." We wish.
By proposing an add-on benefit of any kind, House
Republicans are debating on the Democrats' terms and giving away the only
carrot that might induce Congress to pass Medicare reform. A few years
back a bipartisan commission led by none other than Chairman Thomas and
Louisiana Senator John Breaux proposed having the government help seniors
purchase comprehensive insurance (including drug coverage) on the private
market, not drug-only plans.
Changing Medicare from the current defined benefit to
such a defined-contribution model may be the only hope of controlling
Medicare costs, which even without drug coverage will consume more than
25% of all federal revenues by 2030. John Goodman of the National Center
for Policy Analysis estimates that the House Democratic drug plan would
raise Medicare's deficit to 35% of all personal income tax revenue by
2030.
This cost explosion would guarantee that the
politicians will restrict patient access and impose price controls down
the road. (Senate Democrats, with their talk of "non-preferred"
drugs, are already explicit about this.) Such policies have all but killed
Europe's pharmaceutical industry, and they will mean inferior health care
for seniors and everyone else as research budgets are slashed.
With drugs playing an increasingly important role in
modern medicine, it makes sense that Medicare should have a drug benefit.
But seniors won't like it unless it's done right. About two-thirds of
seniors already have some coverage, often far better insurance than what
any of these plans would offer. But once the federal government assumes
responsibility for giving seniors prescription drugs, employers will cut
the coverage out of their retirement benefits. Then remember Rostenkowski.
The good news, we suppose, is that none of these
plans is designed to become law this year. The Democrats just want the
issue to beat up Republicans this fall, while Republicans want to say they
voted for something. But the health care of American seniors is too
important to be left to such political cynicism.
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