This opinion piece ran in the Washington Post on October 12, 2003.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 10 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 10 years, imagine what the figure will look like in the next 10, 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 10 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?
John Fox teaches seminars on U.S. tax policy and poverty at Mount Holyoke College and is the author of "If Americans Really Understood the Income Tax"