Tuesday, May 25, 2004
There's still time to repeal the Medicare drug benefit
[Michael F. Cannon, "Repeal Medicare Drug Entitlement," The Cato Institute, 23 May 2004.]
Not only were there a host of questionable political maneuvers associated with the passage of the new $400 - $600 million or more Medicare drug benefit, but the whole proposal flies in the face of economic sense. Cato's Michael Cannon explains why legislators should discard it before it ever gets off the ground:
Only after the president signed the program into law did the administration release its higher estimate, which came in at $534 billion.
And this scandal compounds another. When brought to a final vote in the House at 3 a.m. on a Sunday, a clear majority voted against the program. Yet GOP leaders held the vote open for nearly three hours -- rather than the usual 15 minutes -- until they twisted enough arms to change the outcome.
The greatest scandal is the program itself. No one putting his own money on the line would invest in a product like this.
[Chief Medicare actuary Richard] Foster testified before Congress that rather than provide catastrophic-only coverage, the program violates "standard classical insurance principles" by providing coverage that begins at a low deductible then disappears and reappears as one's expenses rise. The point of this bizarre structure, he explained, is political: broad subsidies for non-catastrophic expenses attract more votes. The problem is, they also will lead to over- consumption, inflated drug prices and, if history is any guide, will cost well over $534 billion.
The subsidies were made so broad they will force taxpayers to pick up costs the private sector is now paying voluntarily. The CBO estimates every fourth participant would have had private drug coverage anyway. Employers and unions will receive $71 billion just to keep them from dropping their retirees into the program.
It's hard to remember when more people violated more stated principles to enact such an unprincipled law. Fortunately, the drug program does not take effect until 2006. That gives enough time to repeal it and hold an honest, principled debate about reforming Medicare.
[Michael F. Cannon, "Repeal Medicare Drug Entitlement," The Cato Institute, 23 May 2004.]
Not only were there a host of questionable political maneuvers associated with the passage of the new $400 - $600 million or more Medicare drug benefit, but the whole proposal flies in the face of economic sense. Cato's Michael Cannon explains why legislators should discard it before it ever gets off the ground:
Only after the president signed the program into law did the administration release its higher estimate, which came in at $534 billion.
And this scandal compounds another. When brought to a final vote in the House at 3 a.m. on a Sunday, a clear majority voted against the program. Yet GOP leaders held the vote open for nearly three hours -- rather than the usual 15 minutes -- until they twisted enough arms to change the outcome.
The greatest scandal is the program itself. No one putting his own money on the line would invest in a product like this.
[Chief Medicare actuary Richard] Foster testified before Congress that rather than provide catastrophic-only coverage, the program violates "standard classical insurance principles" by providing coverage that begins at a low deductible then disappears and reappears as one's expenses rise. The point of this bizarre structure, he explained, is political: broad subsidies for non-catastrophic expenses attract more votes. The problem is, they also will lead to over- consumption, inflated drug prices and, if history is any guide, will cost well over $534 billion.
The subsidies were made so broad they will force taxpayers to pick up costs the private sector is now paying voluntarily. The CBO estimates every fourth participant would have had private drug coverage anyway. Employers and unions will receive $71 billion just to keep them from dropping their retirees into the program.
It's hard to remember when more people violated more stated principles to enact such an unprincipled law. Fortunately, the drug program does not take effect until 2006. That gives enough time to repeal it and hold an honest, principled debate about reforming Medicare.
Comments:
Post a Comment
