Eight Reasons To Delay the Imprudent Drug Program

November 9, 2005 • Commentary

The Senate will soon consider a proposal by Sen. John McCain (R‐​Ariz.) to delay implementation of the Medicare prescription‐​drug program currently scheduled to begin Jan. 1.

A lot of people around town made some tough decisions in crafting this program and enacting it into law. Here are a few reasons why they might now want to reconsider those decisions.

1. We can’t afford it. Rep. John Boehner (R‐​Ohio) put it well: “Listen, we’re broke. Let’s face it.” According to the Congressional Budget Office (CBO), the federal government is looking at deficits in excess of $300 billion for the foreseeable future. The budget resolutions working their way through Congress would save at most $50 billion, which would not noticeably change the five‐​year growth in the national debt ($1.6 trillion). By contrast, delaying implementation of the full Medicare drug program would save an estimated $84 billion in two years.

2. We really can’t afford it. Medicare’s financial outlook gets even worse at the end of the current five‐​year budget window. As U.S. Comptroller General David Walker put it last week, “We were already in the hole 15 to 20 trillion dollars before Medicare Part D was enacted, and that’s just for Medicare. And we added another [$8 trillion]. If that’s not imprudent, I don’t know what is.” Absent any changes, by 2008 financing Medicare would require a tax increase whose total cost would equal nearly 25 percent of wages.

3. It is poorly targeted. Many of the program’s subsidies will go to those who are not exactly needy — to wealthy as well as poor seniors. According to the CBO, three‐​fourths of senior citizens already have drug coverage. Millions of those seniors will move into the Medicare drug program, where taxpayers will pay bills that seniors and employers are already paying themselves.

4. It is corporate welfare. A back‐​of‐​the‐​envelope estimate (based on CBO numbers) shows that employers will receive direct subsidies of $150 billion over the first 10 years of the program. Taxpayers will cut those corporations a check just for providing the drug coverage they are already providing.

But the program also includes indirect corporate welfare, in that it enables firms to drop their retirees onto the Medicare rolls, as J.C. Penney and Jostens have already done. The CBO estimates that fate will befall nearly 3 million seniors. Another back‐​of‐​the‐​envelope estimate: that adds another $44 billion in corporate welfare.

5. It invites price controls. The cost of this program will lead to perpetual calls for price controls on prescription drugs. Such measures would rob future generations of miracle cures, leaving them exposed to greater pain and suffering.

6. Congress approved the program without all the facts. In 2003, Medicare’s chief actuary estimated this program would cost significantly more than Congress believed. Yet his estimates were withheld from the public until after the program became law. That and other aspects of the program’s history fell short of the Contract with America’s promise to give legislation “a clear and fair vote.”

Two House Republicans who voted yea now support delay — a significant loss for a program enacted by a slender five‐​vote margin. Many more privately sympathize.

7. This may be the only way to make a dent in the deficit. Rep. Tom DeLay (R‐​Texas) correctly notes that Republicans are receiving almost zero help from Democrats in imposing fiscal restraint. Delaying the drug program, however, is probably the only way that Republicans can get Democrats to help reduce government spending.

8. Seniors aren’t angry — yet. Medicare’s 1966 rollout probably made new entitlements look easy. About half of seniors already had coverage, but switching them to Medicare took little convincing. Medicare offered a single plan with generous coverage and few restrictions.

Today, more seniors may have to give something up. There are also more choices to make; the drug plans have numerous, unique and shifting coverage restrictions. And seniors are generally older today, which means many more are ill‐​equipped to make such complex decisions. The grumbling has already begun.

Some of these factors helped doom the Medicare Catastrophic Act (b.1988-d.1989). And that law didn’t even have a doughnut hole, in which an estimated 4 million seniors will find themselves without drug coverage on Election Day in 2006.

Thomas Jefferson once wrote to George Washington, “Delay is preferable to error.” Responsible members of both parties have an opportunity to choose the better of these two options.

Please, before we swallow this pill.

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