Seniors Don't Need Medicare Drug Benefit
June 18, 2001
Some sort of prescription drug benefit for the elderly will become law. The Congressional Budget Office estimated the cost of a Senate Democrat plan at $318 billion over 10 years -- close to the $300 billion provided for in the budget.
But once implemented the cost of a prescription drug plan inevitably will skyrocket. Estimates never accurately predict how such programs will change behavior. When the government pays the bills for prescription drugs, people will use a lot more of them. Moreover, the increased demand will raise prices.
But the larger question is, Why enact this benefit at all? There is really no demonstrable need for it.
Increasingly the elderly are rich, in large part because they don't have to pay for things the working population has to pay for, such as health care.
- According to the Census Bureau, those age 65 to 69 have the highest median net worth of any age group: $106,408 in 1995
- By contrast, those under age 35 had a net worth of just $7,428, and those between the ages of 35 and 44 had a net worth of only $31,691.
A prime source of the elderly's growing wealth is that many own their homes free and clear. According to the Bureau of Labor Statistics, 65.4 percent of elderly homeowners in 1997 had no mortgage.
- According to the CBO, the average after-tax income of elderly households is just 10 percent less than the nonelderly: $44,000 and $48,500, respectively.
- Taking into account Medicare and assets, the elderly as a group are 24 percent better off than the nonelderly, say economists Stephen Crystal and Dennis Shea of Rutgers University.
- Furthermore, the elderly are 83 percent better off than families with small children.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, June 14, 2001.
For Census data on wealth
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