October
24, 2003
Front-Page
News
This ran in the Washington Post on October
12.
The Wrong Prescription
We Should Help Needy Seniors First—But We Can't Even
Afford That
By John O. Fox, Visiting Lecturer in Complex Organizations
If you're not tuned in to the skyrocketing
costs of prescription drugs, you've been watching too much
MTV. But if you're of a somewhat older generation, you've
probably been listening with at least one ear to the congressional
debate over adding a subsidized prescription drug program to Medicare.
And if you're like me, you're downright alarmed at how
fiscally irresponsible that debate has become.
I grant that no one's harder hit by the burden
of expensive drugs than seniors, each of whom will spend, on average,
about $2,300 on them this year. Looking to ease the pain, both
the House and Senate have passed bills, now in conference, to
help seniors (and certain disabled younger people) cover their
outpatient prescription drug costs.
These bills may arise from good intentions. But
we can't ignore their worrisome flaws: Both would leave millions
of low- and moderate-income seniors still unable to afford most
of their prescription drugs while subsidizing millions who don't
need any aid — wealthier seniors who can afford to buy prescription
drug insurance and pay their out-of-pocket drug costs without
government help. Even more worrisome, though, is the simple truth
that, whatever program the House and Senate conferees finally
vote into existence, it will be a program that America just plain
can't afford.
I don't mean to minimize Congress's
concerns about the cost of drugs for middle- and upper-income
seniors, but in the face of current budget realities, it has to
set priorities. And its first priority should be to assure seniors
in need that they can buy the drugs they require. After that,
it can consider whether, in keeping with all Medicare programs
since Medicare was enacted in 1965, a prescription drug program
should be extended to all seniors.
The bills, however, try to give something to everyone.
The Senate bill provides that no matter how wealthy you may be,
Medicare will pick up 90 percent of the balance once you have
paid an annual premium of $420 and incurred $3,700 of out-of-pocket
drug expenses. The House offers slightly different but similar
largess. Meanwhile, seniors living at the poverty level (about
$8,980 for a single person in 2003) could still end up paying
nearly $2,000 of their drug costs under the House version, a completely
unmanageable amount.
Think of it this way. If your prescription calls
for four pills a day, and you can afford only one, are you really
better off if the government helps you buy only one or two more?
It's like giving a driver stranded in the desert enough gas
to get halfway out.
It's hard to blame our elected representatives
for wanting to spread the wealth here. The appeal of universal
coverage is not, after all, fiscal (since it will cost more) or
economic (since it's likely to increase drug costs) but political.
Guided by the age-old mantra that “a program only for the
poor will become a poor program,” universalists (largely
Democrats in this case) understandably fear that without at least
some coverage for middle- and upper-income seniors, any prescription
drug program will eventually lose popular support.
There's only one catch. Given Congress's
spending and tax priorities, our country can't afford even
a poor prescription drug program for the poor. I'm not just
thinking about endless fiscal deficits on the horizon for the
general budget. Medicare's own fiscal sickness is looming.
Listen, folks: If the $87 billion for Iraq and
Afghanistan worries you, the prescription drug program Congress
is contemplating could give you insomnia. We're talking real
money, at least $400 billion—President Bush's figure—from
general (non-Medicare) tax revenues over the next ten years. We
know, too, that the amount will grow exponentially.
Why? First of all, the expenditures, which don't
significantly come into play until 2006, increase in both bills
every year. How could they not? The Congressional Budget Office
estimates that actual spending on outpatient prescription drugs
by and for Medicare beneficiaries, even without new legislation,
will rise from $107 billion in 2004 to a staggering $284 billion
in 2013. By that time, we will have begun to hear the thundering
sound of baby boomers moving into Medicareland, as our nation
grows older and older. By 2030, the senior population, now 36
million, is expected to almost double. Like it or not, every state
eventually will look like Florida today.
So if Congress intends to spend $400 billion during
the first ten years, imagine what the figure will look like in
the next ten, and in the decade after that. Economists also tell
us that, by making drugs more accessible, Medicare subsidies for
prescription drugs would increase their use by seniors. This would
drive up drug costs even further, including for seniors who can't
afford them in the first place.
Finally, Congress will be under tremendous pressure
to keep upping both the coverage and the percentage of costs it
pays. Entitlements always grow that way. Medicare coverage, for
example, has been recently extended to major lung surgery for
certain people who have severe emphysema. The cost: $60,000 per
operation.
But first questions first: Where will that $400
billion “starter kit” come from? No one knows exactly
how many trillions of dollars of federal deficits lie ahead from
programs already on the books. Yet the figures are so frightening
that they have prompted David Walker, the nonpartisan comptroller
general of the United States, to declare: “If all the [deficit]
numbers are making your head spin, don't worry; just remember
that they are all big, and they are all bad.” Among the scariest
are those of Medicare itself, before enactment of any prescription
drug program. Its expenses are projected to grow over the next
75 years from the current 2.6 percent of GDP to an astounding
9.3 percent. Wrap your brain around this: If Medicare represented
9.3 percent of GDP today, it would exceed all—that's
right, all—federal individual income taxes for this year.
The same Congress that's about to add a prescription
drug program to Medicare refuses to prescribe a cure for the fiscal
illness of Medicare's Hospital Insurance program. This is
the program that pays not only for hospitalization but also for
home health care and skilled nursing facility and hospice care.
The trustees who oversee the Medicare trust funds, including the
secretaries of Treasury, Health and Human Services, and Labor
(not exactly a wild and crazy bunch) estimate that Medicare's
trust fund for hospital insurance most likely will be empty—zero—in
23 years. That's right about when today's fortysomethings
become eligible. At that time, Medicare taxes, which fund the
trust, will be sufficient to pay only 73 percent of benefits,
and less as the years progress.
Okay, you might say, we have 23 years to fix the
problem. Not exactly. Consider these drastic steps, one of which
the trustees tell us must probably be taken this year to restore
the trust fund to actuarial balance over the next 75 years: Either
we'd have to add nearly $6 trillion to the trust fund, or
we'd have to increase the Medicare payroll tax from 2.9 percent
of wages to 5.3 percent, or cut benefits by 42 percent. Maybe
now you'll agree with Congress's solution: Look the
other way. (To be fair, some members of Congress have recently
begun to talk about raising the Medicare premiums for high-income
retirees; but that would achieve relatively little, since the
vast bulk of seniors don't fall into that category.)
It's time for Congress, and voters, to acknowledge
that any prescription drug program for seniors will require many
of us to sacrifice so others may benefit. But because of the magnitude
of the country's other unfunded needs, the sacrifice cannot
apply merely to the rich; there's too much money involved.
Yes, members of the middle class, prepare to step forward, too,
or tell Congress to step back.
Congress could minimize your sacrifice, however,
by restricting the program to seniors in need. For example, Congress
might pay all prescription drug costs for seniors whose incomes
fall below 135 percent of the official government poverty level
and a diminishing percentage of costs for seniors with incomes
up to 200 percent of the poverty level, most of whom can afford
some out-of-pocket payment. While a significant portion of these
costs already are covered by state and federal Medicaid money,
even such a limited program would carry a steep price tag, perhaps
an additional $300 billion to $400 billion over ten years. (Estimates
here can only be extremely rough.) Or Congress could begin with
a more modest program.
Congress must match any program, however, with
a funding mechanism. Either Americans forgo one or more existing
federal programs, or—God forgive me—pay higher taxes.
Fat chance, you're no doubt saying, particularly with elections
little more than a year away. But who knows what message voters
might give? It's your money. What do you think?.
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