NCPA - National Center for Policy Analysis

Medicare Once Had A Prescription Drug Benefit

November 17, 1999

Congress rejected including benefits for outpatient prescription drugs in the original Medicare program. But 33 years later Congress amended the Medicare act to include prescription drug benefits, and it was signed into law by President Reagan.

However, it was repealed the following year.

The Medicare Catastrophic Coverage Act of 1988 began as a relatively modest Reagan Administration bill designed to cover catastrophic medical expenses. But it was expanded by liberals in Congress to include long-term care and an outpatient prescription drug benefit.

  • Under the 1988 law, senior citizens were to pay a flat monthly drug premium of $1.94, beginning in 1991, to be deposited in a Federal Catastrophic Drug Insurance Trust Fund.
  • For outpatient prescription drugs, seniors would pay a drug deductible of $550 and copayment of 50 percent.
  • In June 1988 the Congressional Budget Office estimated the drug benefit would cost $5.7 billion over five years; but just 12 months later, its estimate jumped to $11.8 billion.
  • Department of Health and Human Services officials warned that the problems of designing and implementing a new prescription drug benefit would be "immense" -- HHS Secretary Otis R. Bowen estimated the administrative cost would exceed $500 million.

When seniors discovered how much the catastrophic coverage act would cost them in increased taxes and premiums, they rebelled and the act was repealed. The prescription drug benefit went away with it.

Source: Robert E. Moffit, "A High Price Prescription: Clinton's Medicare Drug Proposal," Heritage Lecture No. 647, November 3, 1999, and "The Last Time Congress Reformed Health Care: A Lawmaker's Guide To The Medicare Catastrophic Debacle," Backgrounder #996, August 4, 1994, Heritage Foundation, 214 Massachusetts Avenue, N.E., Washington, D.C. 20002, (202) 546-4400.


Browse more articles on Health Issues