NCPA - National Center for Policy Analysis

Who Will Pay for Medicare Prescription Drug Benefit?

March 13, 2003

Sometime before the next election, a prescription drug benefit is almost certain to be added to Medicare. Everybody on Capitol Hill says they want one. The debate now is just over how broad it will be.

"All seniors should have help in buying prescription drugs," President Bush said last week. He wants to spend $400 billion over 10 years. Chump change, critics say. Congressional Democrats are pushing for a $900 billion benefit.

While the debate has raged, the proposed benefit has grown steadily:

  • Bush planned to spend $190 billion last year, then the White House later endorsed a $350 billion House Republican plan -- both stalled.
  • The Democrat-led Senate then countered with a $600 billion plan, but after failing to win support, they are rallying behind the $900 billion version.

The demand is certainly there. A new Congressional Budget Office study put total outpatient spending for prescription drugs by Medicare beneficiaries at $1.84 trillion over the next decade. That's up from last year's $1.77 trillion estimate.

Another problem is demographic. The program depends on today's workers to pay for today's users. That ratio is more than 3-1 now, but will fall to 2-1 by 2030.

"It is not a temporary bulge caused by baby boomers," said one expert. "The picture is not a python swallowing a pig, but a python swallowing a telephone pole. It is a long-term problem."

Source: Sean Higgins, "Can U.S. Find Money To Pay For Medicare Drug Benefits?" Investor's Business Daily, March 12, 2003.

 

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