Take Medicare Snafu off GOP's Fast Track

Congress is about to enact a new administration-approved bureaucratic entitlement program — the biggest governmental expansion since the Great Society, President Lyndon B. Johnson’s federally sponsored slate of social programs created in the 1960s.

But the giant Medicare reform bill pending in the Senate, which contains a new prescription drug subsidy program for the elderly, is stuffed with so many add-ons that it’s an about-face from the direction President Bush wanted to move toward when he crafted his original plan.

Bush’s reform strategy emphasized giving Medicare beneficiaries strong incentives to buy into private health-care and drug-prescription plans; calling for stricter cost containment; slashing the regulatory thicket that Medicare has become for the health-care industry; and rejecting price controls that would send premiums into the stratosphere and choke off the development of new drugs.

But the bill stitched together by Senate Finance Committee Chairman Charles Grassley of Iowa and Sen. Max Baucus of Montana, the panel’s ranking Democrat, “makes three tragic errors,” according to a Heritage Foundation analysis being circulated on Capitol Hill this week. The analysis states that the bill:

  • “Creates a new open-ended entitlement whose cost is impossible to predict” — though health-care scholar Joseph Antos of the American Enterprise Institute puts the long-term price tag at between $8 trillion and $13 trillion in total unfunded liabilities.
  • “Adds a labyrinthine regulatory structure to a system already hemorrhaging administration dollars.”
  • “Makes a move toward price caps which history teaches us will cause premium costs to explode.”
  • Until now, the president and fellow Republicans have had the GOP’s conservative think-tank network — which helps party leaders in their decision-making processes — on their side in just about every policy battle of the past two years: tax cuts, drilling for oil in the Arctic National Wildlife Refuge, the next step in welfare reform, and opening up social service grants to faith-based organizations.

    But when senior analysts from the Heritage Foundation, the American Enterprise Institute and the Galen Institute saw what was in the Grassley-Baucus bill, they hit the roof.

    “The legislation makes a mockery of sensible budget control or prudent reform,” says Stuart Butler, Heritage’s chief domestic policy analyst. “Rather than combining steps to help some seniors with reforms to the unsustainable finances of the Medicare program, Congress’ ‘reforms’ will reduce choice and innovation and impose staggering financial burdens on our children and grandchildren.”

    The Congressional Budget Office estimated that the proposal will cost around $400 billion over 10 years, but that’s only a guess (and a short-term one at that). There are no serious cost controls in the bill.

    But even if the costs were accurate, “it is not the next 10 years that matter,” Butler says in his analysis. “It is the years after that when the full force of the Baby Boom generation hits Medicare and Social Security.”

    “Within 15 years Medicare already faces a Niagara Falls of red ink. Adding a drug benefit without serious reforms and constraints on future spending means massive tax burdens on generations to come,” he says.

    “The bill is based on bad policy. Grassley and Baucus insisted that those on traditional Medicare must get a drug benefit equal to those joining the new market-based option,” says Grace-Marie Turner of the Galen Institute, a health-care advocacy group.

    “That violates Bush’s important principle — which the entire free-market policy community supports — that a new drug benefit should be a carrot to encourage seniors to join (private) modern health plans that can provide better benefits,” she says.

    The Senate bill is not only enormously complicated, but key provisions to “recapture payments” when a plan pays more for a drug than the national average price will “induce uniform prices by manufacturers — no more competition for discounts,” says the Heritage study.

    Also disturbing are administrative provisions authorizing Medicare “to collect all the price and volume data from all the plans for each and every drug, for each and every prescription, and for each and every beneficiary.”

    First of all, this raises chilling privacy concerns. Second, data showing what Medicare spends on each and every drug “will inevitably lead to congressional hearings targeting the high cost/high volume drugs that are costing Medicare the most money,” says Heritage health-care specialists Edmund Haislmaier and Robert Moffit.

    This will almost definitely lead to political pressures to impose price controls on the most widely used and costliest drugs, which will kill the pharmaceutical industry’s ability to reap the rewards from years of costly research and testing that has led to hundreds of life-saving bio-tech drugs.

    With White House prodding, this bill is on a fast track to Bush’s desk, and may have the president’s signature before July 4. His advisers, blithely ignoring the larger policy disaster, think it will rob the Democrats of a key issue next year and clinch the president’s re-election.

    But there are a lot of harmful provisions in this big-spending bill that Democrats like Ted Kennedy and Tom Daschle are supporting. Bush needs to call a time out, slow down the hasty legislative process and urge lawmakers to give him a bill that meets his original fail-safe goals.