Tough Questions for President Clinton's Prescription Drug BenefitCommentary by Pete du Pont
July 15, 1999
Is it just me, or have the media been giving President Clinton a free ride on his Medicare prescription drug benefit proposal?
I would have thought that when a president comes out with the biggest new entitlement proposal in Medicare's 35-year history, the media would be peppering him with questions - tough questions.
For example, the president thinks his plan will save Medicare money. But actuaries always charge more when they add a prescription drug benefit to a health insurance policy. Any cat calls from the media when the president tried to pull this wool over their eyes?
Maybe the president has so undermined his credibility that the media don't care anymore. But I do, and I think you do too. So if the media won't ask the tough questions, try these.
Will the program bankrupt Medicare? Medicare is already facing financial collapse. The situation is so bad that Congress created a bipartisan commission to look into ways to save it. Columnist Robert Samuelson raised the ethical question recently whether our generation has any business strapping our grandchildren with a system already financially on the brink. By the time today's college students reach retirement age, the tax burden created by Medicare will have grown from the current level of about 5.35 percent of payroll - that includes the 2.9 percent payroll tax plus funds paid from general revenue - to almost 14 percent.
Under these conditions, does it make sense to add a new and very expensive benefit?
Will the president's plan pay for itself? No. In fact, the president doesn't make any pretense at saying the program is funded. He proposes spending $118 billion of the budget surplus over the next 10 years - which may or may not exist - to make up the shortfall.
Will the president's plan help poor seniors? Not really. He intends to pay their premiums, but so what? Medicaid already does that for millions of poor seniors who are known as "duel eligibles," i.e., they get both Medicare and Medicaid.
But the truth is that under the President's plan, no senior gets much help. In the initial year, the government would only pay $1,000 toward each senior's prescription drugs. That is very little help for those with catastrophic prescription drug costs of say, $12,000 a year, or even more.
Is the president's plan low-balling the program's cost? You know it. The White House estimates drug expenditures to be growing by 11 percent in 2009. But most health plans are experiencing a 15 percent growth today. And there will be far more drugs available in 10 years.
But there is another fatal oversight: utilization. Liberals never take into account increased utilization when the government subsidizes something. If the government pays half the cost, that's like a half-priced sale. So drug usage - and thus, cost - will greatly increase. To paraphrase P.J. O'Rourke from several years ago: You think drugs are expensive now, wait until the federal government decides to make them affordable.
Will the president's plan destroy the private market for prescription drug coverage? Yes. Currently, about 65 percent of Medicare beneficiaries have a prescription drug benefit. Although the president has included tax incentives to encourage employers who provide retirees with a drug benefit to continue to do so, the White House expects the large majority of seniors - 31 million - to shift to the government plan because the government's plan would be so cheap. Thus, the federal government would use tax dollars to subsidize its own health plan, even as it complains about the high cost of private coverage.
Of course, there are some seniors who are faced with significant prescription drug expenses that they cannot afford. But doesn't it make more sense to consider a targeted solution that reaches those most in need, rather than a new entitlement meant to create a Bill Clinton legacy?
The National Center for Policy Analysis is a public policy research institute founded in 1983 and internationally known for its studies on public policy issues. The NCPA is headquartered in Dallas, Texas, with an office in Washington, D.C.