Posted on 10/26/2003 12:43:56 PM PST by Cathryn Crawford
The Wrong Prescription for Medicare
by Robert Moffit and Derek Hunter
The cost of Congress’ Medicare drug proposals is rising -- and so is public frustration.
A little history: In June, both houses passed slightly different Medicare reform bills. Each would create a massive Medicare drug entitlement, instead of targeting help to poor seniors who need it. Anybody turning age 65 -- including a retiring Bill Gates or Donald Trump -- would be handed a taxpayer-financed drug benefit.
President Bush wants lawmakers to settle their numerous differences quickly and send him a Medicare bill. But we’re still figuring out the ramifications of this complex entitlement expansion.
For instance, three out of four retirees now have some form of prescription-drug coverage, many through former employers. Most seniors like their existing coverage. The prospect of losing it frightens them. And while retiree drug coverage is often required under union contracts, if taxpayers are going to pick up drug bills, many companies will have a powerful incentive to save money by dumping retirees out of their private coverage, or at least significantly scaling it back.
This frightening scenario is very real. The Congressional Budget Office says that between 32 percent and 37 percent of seniors with coverage from their employers are going to get dumped out of that coverage. This estimate mirrors new independent research, conducted by Professor Kenneth Thorpe of Emory University. Thorpe, a former Clinton administration health policy adviser, estimates that 33 percent of seniors with employer provided drug coverage would lose it.
Of course, the size of the losses would vary state by state. According to Thorpe, nearly a third of the more than 4 million seniors at risk of losing their private coverage are concentrated in five states: Michigan (where 218,000 could lose coverage), New York (326,000), California (385,000), Ohio (243,000) and Florida (252,000).
Another problem is that under the congressional drug bills, seniors would pay a monthly premium of about $35 for the drug benefit, plus a deductible of $250 or $275. After that, the government will pay just half of all drug costs up to a certain amount, where coverage stops completely.
These are the now infamous “doughnut holes,” or gaps in coverage where seniors would have to pay a large chunk of their drug costs until they reach a maximum out-of-pocket amount. In the Senate bill, seniors would pay $3,700; in the House version, it’s $3,500. Catastrophic coverage would finally kick in at that point. But as many retirees with employer-based coverage are learning, the congressional drug bills are vastly inferior to what they already have. Millions would be paying more for less.
And that’s just out-of-pocket expenses. Throughout their working lives, many seniors deferred pay, expecting that their companies would provide drug coverage after retirement. When those people are dumped into an inferior government drug program, they will have lost not only that deferred compensation, but also the full value of the promised future drug coverage. That’s a big price to pay.
Over the August recess, many lawmakers heard from seniors who don’t like the Medicare drug proposals. But working taxpayers should be even angrier.
After all, lawmakers once claimed the 10-year cost of their Medicare drug bills would be $400 billion. Predictably, that turned out to be low. Less than a month later, the Congressional Budget Office revised the costs to $425 billion for the House’s drug bill and $432 billion for the Senate’s.
It gets worse. Congress has suddenly realized that its Medicare “reform” would encourage companies to drop retiree drug coverage, so some lawmakers are now considering hitting the taxpayers a second time.
A recent New York Times report said lawmakers may offer more federal subsidies for firms in order to discourage them from dropping the drug coverage they promised their retirees. In plain English, this is corporate welfare.
The pattern is all too familiar. First, the government creates a complicated and costly mess. Second, it bills taxpayers for another costly solution to the mess it created in the first place.
But all is not lost. Congress has time to go back to the drawing board and refashion the Medicare drug provisions. Three simple rules should guide lawmakers:
· Don’t disrupt the lives of millions of well-covered seniors by adopting a plan that encourages employers to dump them into an expensive, inferior government drug program.
· Help the poor seniors who really do need a hand with their drug bills.
· Refrain from adding insult to taxpayer injury by saddling them with the cost of a corporate-welfare package to cover the price of congressional miscalculation.
Congress needs to control entitlement spending, not bankrupt the next generation.
Robert Moffit is the director of the Center for Health Policy Studies at The Heritage Foundation where Derek Hunter is a researcher.
:o)
Everywhere I look, I see a growing connecton between health insurance and government. Private employers want out. ;-)
Who can blame them? The costs are astronomical. Of course, the concept of insurance as applied to health simply makes ZERO sense.
The concept of insurance is that a lot of people make small payments, and a VERY FEW people collect large amounts of money when tragedy befalls them. That's why fire insurance and collision insurance makes sense.
However, in health insurance, you have AT LEAST 60 to 80 percent collecting at some point. Insurance cannot work like that. I think the only smart concept that can be applied is the Medical Savings Account.
I don't blame them, but I do hate to see the traditional connection between health care insurance and employment damaged or severed. I think that connection has been the major reason that the connection between health insurance and government hasn't been stronger. It looks like that's where we're going, though.
Tony Snow asked Senator Frist about this this morning on Fox News Sunday and Frist totally ignored the question.
My former employer pays 50% of the cost of my prescriptions. And the coverage is FREE, has no deductible and no limit.
Of course my former employer will cancel the program if this garbage passes.
I wish. I got the even more depressing impression that Frist didn't understand the question. Frist is a doctor speaking with career politicians. None of them have a clue as to what benefits employers offer to their employees/retirees.
And I don't know what could convince them. AARP wants socialism, so they'd never mention that most retirees will be much worse off with this new "benefit".
Maybe it's time for a lot of people to e-mail or call Frist. And the WH.
I think you are so right, and I don't know why more people don't see it. There's never going to be enough money for everyone to have unlimited health care. Someone has to decide who gets what. With the system we have now, the ins. cos. mostly get to decide (of course, if you have money, you can override that decision).
With Nat'l Health care (like GB & Canada) the gov't decides. And they make it much harder for any individual to override the decisions.
MSA's are the only way for us to make all our own health care decisions.
Well, a lot of people buy into the concept that health *IS* insurable. All you need to do is point out that insurance that has nearly a 80% payout is no longer insurance. That is the state of health insurance. Nearly everyone needs to use it.
It's not insurance. It's capital shuffling.
Insurance only works when the collectors are many fewer than the payers.
The deductibility-raise might be a realistic option, except, it would then more and more resemble paying out-of-pocket.
I don't have any objection to MSA's, but I suspect that no matter what kind of system is set up, it's gonna be more uniform, more universal and more political in scope. At the instance of both our major parties, the federal government is already so deeply involved in health care that it will be very tempting for them to just take over the whole system in some manner.
It will take some hellish lobbying and a whole lot of brainstorming and explaining to people to prevent that. Hillary in 2008 will be concentrating partly on this (it seems less likely that she will get much traction in 2004 with the economy recovering) and you know how fervently she wishes for a Canadian system.
We have our work cut out for us. Keep your health; we'll be busy soon. ;^)
And does he care what is in it? Or just he just want to sign something, anything, for political gain?
I don't think so. Most people are just thinking that someone else will pay their bills. Most do get health ins. from employers or the gov't (Medicare or Medicaid), and pay relatively small sums -that they see- for it. (Never mind that their salaries would be higher or taxes lower with some other scheme).
This is how Communists make inroads. They promise to take care of everyone. That sounds good to far too many people.
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