Commentary

Medicare Drug Plan: Repeal or Join?

Rep. John Boehner, R-Ohio, recently summed up the federal government’s financial situation: “Listen, we’re broke. Let’s face it.”

That’s an understatement.

Congress faces annual deficits of $300 billion for the foreseeable future, requests of $200 billion for hurricane relief, and an imminent explosion in entitlement spending. Acknowledging this reality, a growing number of legislators including U.S. Sen. John McCain, R-Ariz., are calling for the delay or cancellation of the Medicare prescription drug entitlement scheduled to take effect in January. It’s easy to see why.

Come January, taxpayers will finance drug coverage for all 40 million seniors on Medicare, even though 75% of seniors already have coverage. The program, estimated to cost $850 billion in the first 10 years, includes massive corporate welfare, invites harmful price controls on pharmaceuticals, and was enacted under an ethical cloud. It also imposes on taxpayers an unfunded liability larger than that of the entire Social Security program. If ever a government program were a candidate for repeal, the Medicare drug program is it.

Accordingly, when House conservatives issued a menu of proposed spending cuts last month, the cornerstone was a one-year delay of that program. This month, McCain called on colleagues to “at least delay” the program for two years, which would save $84 billion.

McCain was joined by U.S. Reps. Jim Cooper, D-Tenn., and Jeff Flake, R-Ariz., who recommended dismantling this fiscal time-bomb and starting over. So far, two Republicans who voted for the program — U.S. Reps. Jeb Hensarling, R-Texas, and Dave Weldon, R-Fla. — have come out in support of delay. Those are significant defections from a law that passed the House with two votes to spare.

In private, many more Republicans are inclined to support delay or repeal. Yet few have come forward because of fierce opposition from the business community and the Bush administration.

Employers rarely admit it, but they are petrified at the thought of losing some $150 billion in corporate welfare included in the program. Instead, their lobbyists argue that employers are planning changes to retiree benefits that would be tough to reverse, and Medicare has already spent hundreds of millions of dollars to educate seniors. Yet seniors are supposed to enroll in this program in mid-November and most are still overwhelmed by the program’s complexity.

Although delay would cause some disruption, the program itself will cause much more. Many seniors will lose the drug coverage they now enjoy, and continuous shifts in coverage could mean they lose coverage of the drugs they need. Moreover, rank-and-file Republicans may decide that repeal is necessary to save their party from its leaders in 2006. A president’s party typically loses seats in Congress halfway through his second term.

For the GOP, a number of factors will compound that handicap. Party leaders are having difficulty recruiting top-tier candidates for 2006. The conservative base is upset with the president, but also with Congress for its record spending binge.

Already, GOP candidates are putting distance between themselves and President George W. Bush. Worse, the drug program could foment an anti-Republican backlash. Many seniors will enter the voting booth angry over having lost their prior drug coverage. The Heritage Foundation estimates that by next November, 4 million seniors will be stuck in the program’s infamous “doughnut hole” without any coverage.

GOP leaders say repeal is impossible. Political necessity may change their minds. It is also worth noting that repeal is a no-lose issue for perennial GOP insurgent John McCain.

Not only is repeal the right thing to do, it would strike a blow against the GOP establishment. But even an unsuccessful push benefits McCain. The more he has advocated repeal, the more open the GOP leadership has become to restraining spending in other areas. That puts McCain back in the good graces of conservatives and raises his profile in future Medicare debates, of which there will be many.

And pressing for repeal hardly alienates McCain’s admirers on the left, who were never enamored of this program to begin with. McCain played a similar role in 1989, when a Democratic Congress quickly repealed another “done deal” after seniors made it painfully clear that they didn’t like the change in their Medicare coverage or the higher premiums.

Republicans could spare themselves a world of pain by taking their medicine right now.

Michael F. Cannon is director of health policy studies at the Cato Institute and co-author of Healthy Competition: What’s Holding Back Health Care and How to Free It.