Improve Medicare First
Much of the discussion about adding a prescription-drug benefit to Medicare seems to take place in a vacuum.
The healthcare program for the elderly is in serious financial trouble. The retirement of some 77 million baby boomers, which will put unprecedented stress on the program, is only a few years off. The Kaiser Family Foundation estimates that if nothing changes, Medicare will balloon from 12 percent to 25 percent of the entire federal budget by 2025.
Tacking a prescription-drug benefit onto the program without reform only ensures the problem will worsen faster. Yet that's exactly what congressional Democrats propose: Their plans would cost Medicare another $600 billion to $900 billion over 10 years.
The first question in this debate ought to be: How deep is the need for a prescription-drug benefit? The Concord Coalition argues that three-quarters of the elderly already have such coverage: through retiree health plans, Medicaid or other government programs, Medicare HMOs, and Medigap insurance policies. The Department of Health and Human Services reports that only 2 percent of the elderly said they couldn't obtain a needed prescription during the course of a year.
But for those elderly poor who rely on expensive drugs for their serious health problems, the hardship is growing. In constructing a drug-benefit add-on to Medicare, the focus should be on how to help those people who actually need help. Why spend billions giving a benefit to everyone, regardless of need?
President Bush's plan, to its credit, tries to address the entire Medicare picture. It would provide a new prescription-drug benefit while at the same time beginning Medicare reform. The plan, which would cost $400 billion over 10 years, would give seniors three Medicare choices:
• Stay in traditional Medicare and receive a discount card for 10 to 25 percent off drug purchases. After a patient has spent an unspecified amount (probably several thousand) in a year, additional coverage would kick in.
• "Enhanced Medicare," which would subsidize seniors' payments into private plans that would offer a drug benefit. This would mirror the quite successful healthcare plan currently provided to members of Congress and federal employees.
• "Medicare Advantage," an update of the current Medicare+Choice managed-care program, which may or may not have a drug benefit. This would require higher reimbursements to providers, a stumbling block for the current version, in which about 5 million people are enrolled.
The president counts on millions of Medicare beneficiaries moving from the traditional plan into the other two options, thereby saving the government billions of dollars to help pay for the new benefit.
But even Health and Human Services Secretary Tommy Thompson admits that, by itself, the president's plan would also worsen the Medicare funding picture. He argues, however, that it's a start, and further reform should follow.
It's tough to evaluate the president's program because it's short on specifics. Hill Republicans want to craft the details themselves, Secretary Thompson says, so the White House went along in hopes of getting a bill.
But it's far from clear that GOP congressional leaders can enact reform. Already powerful committee chairmen are grumbling about adding a bigger prescription benefit to traditional Medicare - which would interfere with reform, reduce savings, and add to the long-term problem.
The Democrats complain that the administration wants to "privatize" Medicare. But the only way Medicare can stay viable in the long run and meet the needs of seniors and the disabled is to adopt a market-based approach that jives with the current healthcare system, not that of 1965.
Joseph Antos of the American Enterprise Institute proposes a market-based drug benefit including a low- income subsidy, a discount card, and catastrophic insurance protection. Low-income seniors would get a $600 annual subsidy on the card. They could roll over to the next year what they don't spend. Insurance would pay beneficiaries 80 percent of drug costs between $2,000 and $6,000 and 100 percent after that. Higher-income participants could make limited tax-deductible contributions to their card. Insurance premiums would also be deductible. Like the federal employees' program, beneficiaries could chose among several competing providers. Cost: About $302 billion over 10 years.
That's a good example of the kind of plan Congress ought to look at - only as part of comprehensive reform.