Yesterday was the last day for seniors and the disabled to enroll in the new Medicare drug program without penalty. Today, official Washington is congratulating itself on another successful entitlement expansion - the largest single entitlement expansion since the Great Society.
Sadly, the news reports have obsessed
on various government foulups during the signup process. The real
problem is that this program will eventually replace existing
public and private spending for drugs with new taxpayer financing -
at a time when entitlement costs are already growing much more
rapidly than the tax reciepts that are supposed pay for them.
Roughly three quarters of all seniors already had some form of
prescription drug coverage even before the hugely expensive
Medicare drug bill was passed in 2003.
The real problem was much simpler and much easier to resolve:
targeting assistance to low-income seniors who needed the most
help. But Democrats and Republicans in Congress joined to reject
that option - and the Bush administration, which originally focused
on helping the needy, acquiesced.
Most of the Medicare beneficiaries enrolled in the drug program
were enrolled automatically, whether by employers (getting generous
taxpayer subsidies) or through the new Medicare Advantage
plans.
The roughly 6.4 million Medicare beneficiaries also eligible for
Medicaid had no choice at all in the matter: They were simply
transferred, en masse, into the new Medicare drug program. That's
where the predictable and well-publicized glitches, such as
computer matching foul-ups, were greatest.
In a huge drug entitlement governed by more than 1,100 pages of
mind-numbing regulation, it is difficult to get all the details
right.
But the enrollment numbers reached yesterday are irrelevant over
the long run. Congress created a universal entitlement - and a
universal entitlement will eventually crowd out most alternative
coverage, including employer-based coverage.
The dynamics are in motion. When the costs increase, as they surely
will, so will the congressional pressure to impose some form of
price-control regime on prescription drugs. (That will be the
ultimate prescription for lower-quality medical care for American
seniors: You can't get more of anything by paying less for it.
)
Meanwhile, the Medicare trustees are reporting that the longterm
(75-year) unfunded liabilities of the Medicare program - the
benefits promised but not paid for - have reached $32.4 trillion,
$8 trillion from the drug entitlement alone.
The bigger costs are going to hit heavily when the first of the 77
million Baby Boomers start to retire in 2011. No one in Congress
has unveiled a plan to pay for it. The tacit consensus seems to be:
Stick the 20-somethings with the big bills.
Those 20-somethings may not realize it now, but they have a lot of
taxpaying to do - Medicare, plus larger Medicaid and Social
Security bills. What will it cost to fully fund the Big Three? My
colleague, Heritage federal budget expert Brian Riedl, points to
cautious, mainline predictions of the federal budget picture -
which show that, absent serious entitlement reform, the cost will
boost federal spending from 20 percent of gross domestic product to
almost 38 percent of GDP by 2050.
Riedl says the real figures may be much worse - leaving Congress
the choice of hiking taxes until they are $11,000 higher per
household than now, or eliminating virtually all other federal
programs, including defense and veterans benefits, by 2045.
Congress must grapple with entitlement spending. One option is
means-testing the benefits.
Starting next year, wealthy seniors (singles making above $80,000,
couples above $160,000) will be asked to pay a little more of their
Medicare Part B premium costs - 28 percent, rather than the 25
percent that all now pay.
That small increase for a few marks a significant change in the
Medicare program. The next step should be to start transforming
Medicare from a defined-benefit program into a defined-contribution
one.
Baby Boomers should be able to carry private health insurance
coverage into retirement with them, and get a government
contribution to offset its cost. The government contribution itself
should reflect market conditions, but be capped at an annual dollar
amount. And any retiree should be able to buy more expensive
coverage, above the amount of the government contribution, if they
wished to do so.
Congress can delay taking action, but every delay raises the tab
for taxpayers.
Robert Moffit is
director of the director of the Center for Health Policy Studies at
the Heritage Foundation.
First appeared in the New York Post (Online Edition)