Activist Handbook 2000: Medicare Reform and Prescription Drugs

Medicare Reform and Prescription Drugs

Why CSE Cares

The Issue:

CSE believes that health care services are products that are best allocated through the decisions of individuals in the private marketplace. Health care services are, at times, critically important, and a market-based system offers the best chance to expand choices and control costs: government control of health care is typically inequitable, inefficient and irrational. Medicare, which provides health care to America’s elderly and disabled, is a case in point.

The Problem:

Medicare is going bankrupt even while it fails to meet the health care needs of the 40 million older and disabled Americans already covered by the system. When the baby boomers retire, Medicare rolls are expected to nearly double, further straining an ailing system. Nevertheless, many politicians want to expand Medicare to include prescription drugs. Adding prescription drugs to the roster of Medicare-covered service will bankrupt Medicare sooner while providing worse coverage than is currently available through the private sector.


1. Most seniors already have drug coverage and can afford their medicines now.

· 65 percent of senior citizens have insurance coverage for outpatient prescription medicines.

· In a 1997 government survey, only 2 percent of people over 65 said they had difficulty obtaining prescription drugs.

· The average total drug expenditures per senior in 1999 was estimated to be $942.

· The median out-of-pocket cost is about $200.

2. Medicare faces a looming financial crisis.

· Medicare spent over $210 billion last year, and is projected to cost nearly $500 billion in ten years (without any new benefits).

· This spending accounted for more than 12 percent of all federal expenditures last year; in comparison, national defense spending was 16 percent.

· Medicare currently has 39 million beneficiaries; in 2030, it will have 77 million.

· There are now four workers per retiree; in 2020, there will be less than three.

The Solution:

Real Medicare reform should give seniors more choices – not more government.

After paying into the system for over three decades, they should be able to use Medicare’s limited funds to select the type of coverage that is right for their individual circumstances, including coverage for prescription drug costs.

Talking Points

1. Most seniors already have drug coverage and can afford their medicines.

· 65 percent of senior citizens have insurance coverage for outpatient prescription medicines.

· In a 1997 government survey, only 2 percent of people over 65 said they had difficulty obtaining prescription drugs.

· The average total drug expenditures per senior in 1999 was estimated to be $942.

· Medicaid pays for prescription medicine for impoverished seniors.

2. A government-run prescription drug program would make things worse for most seniors.

· Under the Clinton-Gore plan and the plan proposed by Democrats in Congress, all seniors will be forced into the government program.

· Seniors would have higher monthly premiums than under private insurance policies, and the government would cover only half of the cost of medicines up to a low annual limit.

· The government would control which seniors get which medicines.

· Rationing would be the inevitable result of government cost controls.

· The $40 billion annual cost of a prescription drug program will hasten the bankruptcy of an already broken Medicare system.

3. Government price controls would be a health care and economic disaster.

· Government price controls will stifle research into medicines that may treat illnesses that uniquely harm seniors. Pharmaceutical companies reinvest $20 billion annually into researching new medicines. If they are not allowed to profit from cures that help seniors, they will have no incentive to research potential medicines.

· The Clinton plan and others in Congress often claim they have no price controls, but, in fact, if the government is the only organization purchasing medicines for use by seniors, it will have the power to control prices.

· Price controls create shortages. If the government requires a company to sell medicine at a price less than what it costs to produce the product, it may stop producing the product in the future.

· The price of medicines rose 3 percent in 1999. The reason overall drug spending was big news is simply that people are using more medicines.

CSE’S Agenda on Medicare and Prescription Drugs

Stop a government takeover of prescription drugs. Clinton, Gore, and others in Congress are pushing to have the federal government control seniors’ access to necessary medicines. Their plans would produce rationing of these medicines and force seniors to pay more for less.

Stop price controls. Some legislators want to limit the price of medicines. CSE wants to halt these plans, as they would produce rationing and less research into new medicines. The cost of medicine is not the biggest problem for seniors – the lack of affordable insurance coverage for medicines is.

Real Medicare reform. Despite Medicare’s problems, none of the proposals indicate that politicians are more likely to make things better than worse. (notwithstanding the basic recommendations of the National Bipartisan Commission on the Future of Medicare). Real Medicare reform follows these principles:

1. Giving seniors more choices.

2. Lower costs, not higher taxes.

3. Achieving cost savings through consumer incentives and competition, not through government rationing, price controls, or new mandates.

Fortunately, politicians do not need to reinvent the wheel. They have already given themselves and federal employees a great deal of freedom through the Federal Employees Health Benefits Program, which allows workers to choose a private health plan that the government largely pays for. Why can’t Congress and the President devise a similar system for Medicare? Medicare then could be truly re-formed as a self-sustaining program that will give the next generation of seniors the health care that each of them needs.

Allow seniors to visit the doctor of their choice. Under current law, a Medicare patient may not pay for a medical service through a private agreement with a doctor if Medicare has rejected the claim. If they do, the physician can be fined by the government. This law, part of the Balanced Budget Act of 1997, must be repealed to give seniors the freedom to control their own health care.

Sample Letter to the Editor about

Clinton’s Prescription Drug Plan

Dear Editor:

I’m writing because I’m concerned about Clinton, Gore and the Congressional Democrats’ prescription drug plan. It sounds like it would hurt seniors more than it would help – for a great deal more money.

First, these politicians want to raise Medicare beneficiaries’ premiums by $25 to $55 every month. This money is taken straight out of social security checks. Second, the government would only pay for half of the cost of a prescription, and only up to an annual limit. Seniors will be forced to pay more for less.

The thing that galls me most is that the government will decide what drugs you can buy and where you can buy them! My doctor should have control over my prescriptions, not the government. Even worse, under the Democrats’ plan, you could never get out of the government programs or its premiums, which are bound to be higher than promised.

I don’t understand why we need this program at all. Most seniors have some kind of drug coverage, and Medicaid takes care of this need for low-income seniors. There’s no reason to give government bureaucrats more control over health care.


Medicare and Prescription Drugs

Questions for Policymakers

1. Al Gore wants the government to control prescription medicines for seniors, instead of insurance companies and pharmacies. Do you support his plan?

2. Under Medicare right now, the government bureaucracy decides what treatments seniors can get and what price doctors and hospitals can charge for their services. Medicare is already going broke. The Clinton-Gore administration and Congressional Democrats have proposed adding medicine to the list of treatments under Medicare’s control. Do you think it’s a good idea for this failing bureaucracy to determine which drugs seniors can get or how much they must pay for them?

3. Federal employees, including Members of Congress, have a choice of health insurance plans offered through the private sector. A bipartisan commission on Medicare has proposed extending this freedom to Medicare beneficiaries. Do you support giving seniors the choice of who will provide their Medicare benefits?

4. Two-thirds of seniors have insurance that covers prescription drugs. But the Clinton-Gore administration and Congressional Democrats want all seniors to get their medicines through Medicare. Do you think the government should take over the prescription drug industry for seniors, as they propose?

5. Medicare is going bankrupt. So isn’t it a bad idea to add more spending and new benefits like outpatient prescription drugs, as the Democrats have proposed?

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