Wednesday, March 24, 2004
Heritage Foundation highlights Medicare crisis
[Robert E. Moffit, Ph.D., and Brian Riedl, "Medicare's Deepening Financial Crisis: The High Price of Fiscal Irresponsibility," Backgrounder #1740, The Heritage Foundation, 23 March 2004.]
The fiscal crisis in the states brought on by Medicaid is taking place at the federal level through Medicare. The lesson that governments should yield to market forces in this area could not be more clear. Whether policymakers will act on this lesson remains unclear:
Taxpayers face a serious financial problem in the Medicare program. As Professor Tom Saving, a Medicare public trustee, has reported, the program is projected to consume over half of all federal income taxes by 2042.
Taxpayers can expect the real costs of the drug entitlement to be much greater than the initial published estimates. Worse, some Members of Congress are claiming that the current drug entitlement subsidy is not enough and want to fill the entitlement’s unpopular “doughnut hole” and double the initial expenditures on the new entitlement. Such prescriptions would not only worsen Medicare’s already difficult financial problems, but also pave the way for government restrictions on prescription drugs for seniors. To control costs of the drug entitlement program, the government would somehow have to limit the supply of drugs, probably through tighter drug formularies or some form of government price fixing or purchasing mechanism. Yet, with demand for prescription drugs rising rapidly, the government cannot and should not provide more by paying less.
There is a better alternative. Members of Congress should get a handle on the exploding costs of the Medicare program before implementing a universal entitlement expansion. To that end, they should at least delay implementation of the drug entitlement while making the prescription drug discount a permanent feature of Medicare, including the new Medicare Advantage system that will take effect in 2006. Such a policy could establish the foundation for a more rational and responsible Medicare drug program: one that accommodates, rather than displaces, a wide variety of private-sector drug options.
[Robert E. Moffit, Ph.D., and Brian Riedl, "Medicare's Deepening Financial Crisis: The High Price of Fiscal Irresponsibility," Backgrounder #1740, The Heritage Foundation, 23 March 2004.]
The fiscal crisis in the states brought on by Medicaid is taking place at the federal level through Medicare. The lesson that governments should yield to market forces in this area could not be more clear. Whether policymakers will act on this lesson remains unclear:
Taxpayers face a serious financial problem in the Medicare program. As Professor Tom Saving, a Medicare public trustee, has reported, the program is projected to consume over half of all federal income taxes by 2042.
Taxpayers can expect the real costs of the drug entitlement to be much greater than the initial published estimates. Worse, some Members of Congress are claiming that the current drug entitlement subsidy is not enough and want to fill the entitlement’s unpopular “doughnut hole” and double the initial expenditures on the new entitlement. Such prescriptions would not only worsen Medicare’s already difficult financial problems, but also pave the way for government restrictions on prescription drugs for seniors. To control costs of the drug entitlement program, the government would somehow have to limit the supply of drugs, probably through tighter drug formularies or some form of government price fixing or purchasing mechanism. Yet, with demand for prescription drugs rising rapidly, the government cannot and should not provide more by paying less.
There is a better alternative. Members of Congress should get a handle on the exploding costs of the Medicare program before implementing a universal entitlement expansion. To that end, they should at least delay implementation of the drug entitlement while making the prescription drug discount a permanent feature of Medicare, including the new Medicare Advantage system that will take effect in 2006. Such a policy could establish the foundation for a more rational and responsible Medicare drug program: one that accommodates, rather than displaces, a wide variety of private-sector drug options.
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