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Capitol Comment

    Capitol Comment 238 - Politicians "Playing Doctor" With Medicare

    06/07/1999

    When politicians try to practice medicine, their remedy is often more dangerous than the disease. The latest Washington proposal to expand government-run health care — this time, Medicare — comes at a time when the main concern should be saving Medicare from bankruptcy.

    When politicians try to practice medicine, their remedy is often more dangerous than the disease. The latest Washington proposal to expand government-run health care — this time, Medicare — comes at a time when the main concern should be saving Medicare from bankruptcy. Instead, some in Congress now want the program to pay for prescription medicine for beneficiaries, even though the money to do so would have to come from higher Medicare premiums, higher taxes, or a trust fund that is predicted to run dry in 2015.1 Nor would this be a minor expansion of the program: this new entitlement could cost between $20 billion and $40 billion each year.2

    Several variations of this plan are circulating, but most share a willful ignorance of Medicare’s hefty future liabilities. Two plans, one drafted by Senators Olympia Snowe (R-ME) and Ron Wyden (D-OR) and the other by Senators Edward Kennedy (D-MA) and Jay Rockefeller (D-WV), would extend this drug coverage to all Medicare beneficiaries, paid for with funds from the budget surplus or from a new tax on tobacco. A bill in the House of Representatives, introduced by Representative Tom Allen (D-ME), would go a step further by instituting price controls in a hopeless attempt to keep the costs of this Medicare expansion "reasonable." Another proposal, by Senator John Breaux (D-LA) and Representative William Thomas (R-CA), arose from the work of the National Bipartisan Commission on the Future of Medicare — and is, appropriately, tied to a fundamental overhaul of the Medicare program.

    Congress is not alone, of course, in desiring to add costly benefits to Medicare. In this year’s State of the Union address, President Clinton said that Medicare should cover prescription drugs, as they are the "greatest growing need of seniors." Surely, everyone wants retirees to have the medicines they need at a price they can afford. His assertion, however, is misleading. In fact, two-thirds of seniors already have prescription drug coverage through Medigap insurance, employer-sponsored insurance, or other sources.3 Medicaid pays for medicine for low-income retirees. So why do politicians want to perform experimental surgery on Medicare?

    The answer is simple. They are playing politics with Medicare. Promising an unaffordable expansion of prescription drug coverage is a politically popular way to appear to be doing something for seniors. In the long term, these proposals do nothing to guarantee the solvency of Medicare for the next generation of retirees. And without serious reform, Medicare’s projected bankruptcy will come when Baby Boomers begin retiring.

    Increasing tobacco taxes is also politically popular at the moment. However, these taxes are not paid by tobacco corporations, but by consumers. A 1998 Tax Foundation study found that low-income consumers pay a majority of these taxes.4 Ironically, these proposals would raise taxes on low-income Americans so the government can give free medicine to middle-class and rich retirees.

    The fate of the Bipartisan Commission provides yet another example of the political gamesmanship that surrounds Medicare. The president and Congress created this Bipartisan Commission as part of the 1997 budget agreement. Handing the difficult problems of Medicare to a commission, however, created a significant delay. When the Bipartisan Commission disbanded this spring, it was unable to make recommendations to Congress because of political disagreements. None of the president’s appointees to the Bipartisan Commission would support the consensus plan developed by Senator Breaux and Representative Thomas.

    Nevertheless, Congress has held hearings on the Breaux-Thomas plan. The president is preparing his own proposal, which will also likely include adding prescription drug coverage to Medicare, but details are scarce. The Breaux-Thomas proposal would require all insurance policies to give seniors the option of prescription drug coverage and would give free prescription drugs to seniors with incomes below 135% of the poverty line. Their reform plan takes a largely free-market approach to Medicare reform, most notably by expanding the opportunity for retirees to choose their health care providers through the Medicare+Choice program.

    Proposals to give all retirees free prescription drugs through Medicare are more than just a solution in search of a problem, since Medicaid already provides for low-income retirees. In reality, these schemes are little more than a stealthy attempt to bring back the 1994 Clinton health care plan piece by piece. Consumers need more choice – not more government – in health care. By increasing the size of the government’s involvement, this costly new entitlement puts health care for future retirees at risk.

    1Board of Trustees of the Federal Hospital Insurance Trust Fund, "1999 Annual Report," March 30, 1999.

    2Merrill Matthews Jr., "A Prescription for Medicare Disaster," National Center for Policy Analysis Brief Analysis No. 288, April 19, 1999.

    3Marilyn Werber Serafini, "Prescription 2000," National Journal, April 24, 1999, p. 1104.

    4J. Scott Moody, "Federal Excise Taxes and the Distribution of Taxes Under Tax Reform," Tax Foundation Background Paper No. 29, January 1999, p. 4.