Nearly a month ago, President Bush signed a $350 billion tax-cut bill into law. The failure to give people who pay no taxes an additional $400 per child tax credit was held up as an example of how the president favors rich people and large corporations. Target the benefits of tax cuts to those who need it most, we are told.
Now Congress is considering — and President seems ripe to support — a Medicare drug benefit for senior citizens worth about $350 billion over ten years, the same size of the tax cut. (The cost is likely to be higher since every estimate about health care spending is a lowball guess.) Yet, most of the subsidy will go to seniors who are wealthy now, and will be wealthier in the years ahead, and to corporations who will seek to shove their retirees into the taxpayer-supported program. Where is the outrage?
The Medicare drug proposals currently under consideration are a political solution to a political problem. They do not solve the problem of seniors who are truly unable to purchase a prescription because of cost and they do not encourage seniors to obtain comprehensive coverage through health plans. These are, perhaps, two separate concerns. The president tried to address them separately when he first took office. But, as we near the 2004 election, neither of these worthy goal will come to pass.
For all the talk about targeted tax cuts, no one cares about targeting taxpayer-supported drug benefits to those who really need it. A study in the latest edition of Health Affairs found that 2 percent of all Medicare beneficiaries surveyed did not fill a prescription because of cost or because Medicaid did not pay for it. That figure has remained flat for nearly five years. Two percent of 34 million is still 700,000 people, but it is not a justification for a $400 billion entitlement.
Second, the difference between seniors with coverage and without has been estimated as a 3-7 prescription difference. This doesn’t even take into account that healthy and well-off seniors with coverage are 1.6 times more likely to purchase medicines than their well-off and fit counterparts without it. Former Congressional Budget Office director Dan Crippen testified recently that “three quarters of the elderly already have insurance of one kind or another that covers some drug spending — may not be enough, may be with hardship or deprivation — but again it is not that we have 40 million seniors without drug coverage.
These 30 million beneficiaries with insurance fill an average of 32 prescriptions a year at an average cost of $45 per prescription. Importantly, the quarter of the Medicare population that has no insurance for pharmaceuticals fills 25 prescriptions a year at an average cost of $37. It may well be that this gap of 7 prescriptions a year is critical, but the perfectly targeted policy for insuring access would” entail these 7 perscriptins for the 25 percent of the population at a cost of around $3 billion.
Third, a recent analysis of future wealth patterns among seniors in the future, also reported in Health Affairs, suggests that they (meaning, we) will be much richer and better able to pay for health care services and new technologies than seniors today. The study finds that “real income will increase greatly between 2000 and 2030.” A similar pattern exists for liquid and all assets as well. Nearly half of all seniors will have annual incomes of $40k or more and nearly 60 percent will have assets of $200K or more by 2030. Meanwhile , the number of people in poverty will fall by half. In absolute terms the number of elderly with total assets exceeding $150 K (adjusted for inflation) will triple from 13.2 million in 2000 to 44. 5 million in 2030.
We should not be considering proposals to spend 350 billion on prescription drugs, given the fact that the elderly will “be much wealthier and better able to handle health-related financial shocks in 2030 than they were in 2000?.” and that most of them are pretty well able to handle them now.
The issue is not access. As Mr. Crippen noted, “Drugs are being supplied now; the question is who should pay. There may be very good and compelling reasons to change the financing from what exists today to place it in the federal budget and on current workers - but that reason is not access.”
The reason is purely political. A healthier and wealthier population should be investing in its own medical needs and driving private health plans to pay for these new medical technologies. Instead, current drug proposals all limit access to innovative medicines to finance universal coverage. Like their European and Canadian counterparts, the new drug proposals will strengthen the control of government to decide which medicines people should get. (Already, members of Congress have introduced legislation empowering the government to determine which drugs are most cost-effective as the basis for reimbursement.) This will move medicine in a retrograde direction. And these limits will hurt the poor and chronically ill the most in order to subsidize wealthier seniors and corporations who want to taxpayers to pay for their retiree health benefits.
The president’s Medicare reform plan would have avoided much of this insanity. But no one said politics is rational. Submitted for your approval: a new drug entitlement that largely benefits increasingly wealthier seniors and corporations eager to toss their retirees into a taxpayer- supported program. And to pay for it, the government restricts and delays access to new medicines in ways that hurt the poor and sick. Prescription drug coverage for seniors is truly the Twilight Zone of American politics.
Robert Goldberg is director of the Manhattan Institute’s Center for Medical Progress.