Commentary

Repeal Medicare Drug Entitlement

By stonewalling a legitimate investigation by House Democrats, the Bush administration is showcasing how principle was abandoned to create the new Medicare drug entitlement, and why the program should be repealed.

After President Bush announced last year he would spend “up to $400 billion” over 10 years to add prescription drug coverage to Medicare, senior officials in his administration suppressed estimates by chief Medicare actuary Richard Foster that projected the leading bills before Congress would exceed that amount by as much as $200 billion. Tom Scully, then Bush’s Medicare administrator, expressly forbade Foster to share his estimates with Congress and allegedly threatened to fire Foster if he disobeyed. The non-partisan Congressional Research Service opined this week it is possible Scully’s actions violated the law.

Meanwhile, Scully and Health and Human Services Secretary Tommy Thompson campaigned for the bills, citing a Congressional Budget Office cost estimate that met the president’s target. As a result, Congress and the public debated and approved the largest entitlement expansion since the creation of Medicare, unaware of the existence of a higher (and highly credible) cost estimate that could have changed the outcome.

Only after the president signed the program into law did the administration release its higher estimate, which came in at $534 billion. When asked about the higher estimate, Bush’s response was Clintonian. Without actually saying so, he hinted he learned of the higher estimate only after he signed the bill. An April 16 letter from HHS to Rep. Henry Waxman (D-Calif.) musters all the obfuscation it can to obstruct Waxman’s investigation.

Bush made trust the theme of his last campaign. Yet he and his administration clearly did not trust the people with all the relevant information.

And this scandal compounds another. When brought to a final vote in the House at 3 a.m. on a Sunday, a clear majority voted against the program. Yet GOP leaders held the vote open for nearly three hours — rather than the usual 15 minutes — until they twisted enough arms to change the outcome.

The Republican leadership did exactly what Republicans criticized Al Gore for attempting in Florida: keep counting until you get the result you want, then stop. Congressional scholar Norm Ornstein calls the vote “the ugliest and most outrageous breach of standards in the modern history of the House.”

These are officials who once signed a Contract with America that promised “to restore the bonds of trust between the people and their elected representatives,” to give legislation “a clear and fair vote,” and to end “government that is … too easy with the people’s money.” These principles were set aside, and in the unwitting service of the administration’s deception. Yet not one Republican has joined House Democrats in calling for greater openness from the administration. We’re a long way from 1994.

The greatest scandal is the program itself. No one putting his own money on the line would invest in a product like this.

Foster testified before Congress that rather than provide catastrophic-only coverage, the program violates “standard classical insurance principles” by providing coverage that begins at a low deductible then disappears and reappears as one’s expenses rise. The point of this bizarre structure, he explained, is political: broad subsidies for non-catastrophic expenses attract more votes. The problem is, they also will lead to over- consumption, inflated drug prices and, if history is any guide, will cost well over $534 billion.

The subsidies were made so broad they will force taxpayers to pick up costs the private sector is now paying voluntarily. The CBO estimates every fourth participant would have had private drug coverage anyway. Employers and unions will receive $71 billion just to keep them from dropping their retirees into the program.

It’s hard to remember when more people violated more stated principles to enact such an unprincipled law. Fortunately, the drug program does not take effect until 2006. That gives enough time to repeal it and hold an honest, principled debate about reforming Medicare.

Michael F. Cannon is director of health policy studies at the Cato Institute.