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    Medicare bills are bad policy, and bad politics

    BY Michael Chahinian
    07/23/2003
    by Michael Chahinian on 7/23/03.

    When Republicans unveiled the "Contract with America" in 1994. they claimed it would be "the end of government that is too big, too intrusive and too easy with the public's money." Hmm . . . the $400 billion Medicare "reform" that Congress is working on is long on spending, big on government and short on reform.

    The Medicare trustees' own estimate for the value of unfunded liabilities, without the new prescription drug benefit, is around $38.3 trillion. That money will have to be paid through either massive tax increases or sharp spending cuts in the future.

    Although the cost of the legislation is currently estimated at around $400 billion for the next 10 years, that is, at best, a guess since the history of government entitlements show that costs tend to balloon over time. (Medicare already costs 10 times more than the original plan envisioned.)

    Just as troubling as the price tag, the new legislation provides benefits worse than what many seniors already have, does little to help those most in need and potentially thwarts innovation in life-saving drugs.

    According to Congress' Joint Economic Committee, 78 percent of seniors already have prescription drug coverage, either through their employers or purchased separately. The Congressional Budget Office estimates that approximately 37 percent of them will lose that coverage under the new legislation, and it could be many more.

    Some existing plans provide 100 percent coverage for all costs after only a $500 annual premium. In the Senate bill, by contrast, enrollees would pay $420 in premiums plus $275 in deductibles annually. Under the proposed changes, someone with drug expenses of $2,000 would pay $695 for only $443 worth of coverage! They would pay $1,557.50, or 78 percent, of their entire bill themselves. Under the House plan, the beneficiary would still pay more than $1,000, or more than 50 percent, of their costs annually. All this while adding an estimated $7.8 trillion to Medicare's unfunded liability, an amount equal to the entire current national debt!

    It is incredible that when existing government entitlements are on the brink of financial collapse, we are adding another entitlement of questionable virtue and unquestionable cost. Even more concerning, the plan has little impact on the indigent.

    We should learn from past mistakes and realize that private-sector insurance plans are able to offer more coverage for less cost. The annual cost of each of the Medicare prescription drug proposals in Congress are at least $1,000 per beneficiary, far more than private insurance companies charge for full coverage. In fact, private insurance would cost far less, and provide more help to those in need.

    Research into life-saving drugs could be seriously harmed by the legislation if new regulations are imposed on drug prices. Pharmaceutical companies rely on the promise of large returns down the road to finance their extensive research operations today. As an example of the funding levels that enable creativity, pharmaceutical maker Wyeth is spending $100 million on an Alzheimer's treatment technique they don't even know will work. American pharmaceutical manufactures lead the world in new innovations because we have a market less encumbered by government controls. As a sign of future threats, the Democratic alternative to the bill called for reimportation of drugs from Canada, which could lead to pharmaceutical makers limiting their sale of drugs to Canada, or negotiating higher prices.

    Finally, the bills are disappointing politically. Republican representatives and senators, as a whole, are supposed to be in favor of fiscal restraint, and above all, free-market policies. In the Medicare debate, however, it seems that many otherwise fiscally conservative, pro-market members of Congress have sold out with the expectation that seniors are going to be exuberant over this legislation. The result, however, may be very different. A recent Zogby International poll found that 74 percent of seniors with prescription drug coverage believe the added benefit won't provide coverage better than they already have. Furthermore, the same survey found that 82 percent of seniors believe they "should have the option of a private health plan approved by the Medicare program to provide their benefits."

    Republicans should focus on fundamental reform of a failing program, not bankrupting the government while providing inferior coverage that does little to help seniors or the indigent. Otherwise, the result for politicians could be a backlash instead of a backslap.

    The writer, a resident of Scarsdale, is a research assistant at Citizens for a Sound Economy in Washington, D.C.