Last month, seniors and the disabled
passed the point at which they can enroll in the new Medicare drug
program without penalty. And official Washington congratulated
itself on another successful entitlement expansion - the largest
single entitlement expansion since the Great Society.
Sadly, the news reports obsessed on various government foul-ups
during the sign-up process. The real problem is that this program
eventually will replace existing public and private spending for
drugs with new taxpayer financing - at a time when entitlement
costs already are growing much more rapidly than the tax receipts
that are supposed pay for them.
Roughly three out of every four 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 solve: target
assistance to low-income seniors who needed the most help. But
Democrats and Republicans 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 6.4 million Medicare beneficiaries also eligible for Medicaid
had no choice 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's difficult to get all
the details right.
But the enrollment numbers that were finally reached are irrelevant
over the long run. Congress created a universal entitlement - and a
universal entitlement eventually will 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 long-term
(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 that
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 they are 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 more than $80,000, couples more
than $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 and get a government contribution to
offset its cost. The government contribution itself should reflect
market conditions, but it should 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 he or
she wishes 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.
Distributed nationally on the Knight-Ridder Tribune wire