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164 IRET Congressional Advisory 1 (2003)

handle is hein.taxfoundation/iretcgadv0161 and id is 1 raw text is: INSTITUTE FOR RESEARCH ON THE ECONOMICS OF TAXATION IRET is a non-profit 501 (c)(3) economic policy research and educational organization devoted to informing the public about policies thait will promote growth and efficient operation of the market economy. November 20, 2003 Advisory No. 164 MEDICARE BILL: DANGERS AND OPPORTUNITIES The Medicare bill has called forth a lot of emotion, sound, and fury, but it is neither the cure- all nor the disaster that is it has been made to seem. It is a hard bill to analyze due to its length and complexity, and to the high degree of uncertainty about the responses it will trigger on the part of consumers and employers. The program will not leap at once to socialized medicine. It is certain to cover many of the needy elderly. But, as currently drafted, it will not be attractive to the entire elderly population. It even provides some additional payments to induce private health care providers to return to the MedicarePlus Choice system. However, it micro-manages the process and threatens to stifle that initiative as it strangled the previous attempt. Therefore, the outcome of this experiment will depend heavily on how Congress and the Administration act in the future. If they do not work hard in the future to preserve the limited private sector initiative in the bill, and if the program is not on target with its various balancing schemes, the program could easily spin out of control into a heavily subsidized, universal, single payor system. If, instead, the Congress and the Administration work hard to expand the private plan options, it could lead to a better health system down the road. Helping the poor is a national consensus. Society has chosen to aid the poor in obtaining the many new life-saving medicines that have become available since Medicare was established, just as it helps them to obtain food and shelter. Drugs are a far larger part of medicine today than they were when the Medicare program was founded. It makes little sense to provide subsidized hospital and physician care while leaving drugs out of the program. Some conditions that can be kept in check with medication can, if left untreated, lead to expensive hospital stays. Thus, there will be some efficiency gains from reducing the price distortion between Medicare-covered hospitalization benefits and privately-borne drugs costs. Nonetheless, the Medicare bill is a very cumbersome way of helping the poor to afford drugs. Who needed help? Over 75 percent of the elderly have drug coverage under Medicaid, Medigap polices, MedicarePlus Choice plans and HMOs, employer retirement health plans, or other private insurance. Of the roughly one-quarter of the age group that is not covered, many are not poor, but are healthy and feel no need for the protection. The only pressing problem is how to help the near-poor who are too rich for Medicaid but, because they require multiple, high-value prescriptions, are badly stressed by their drug outlays. The concern for such individuals could have been addressed with a low-income drug subsidy, such as a beefed-up version of the $600 drug discount cards being offered in the Medicare bill. The discount card could also be a useful tool to enable consumers to negotiate a better deal of some medications. It should be noted, however, that several drug companies are already offering discount g~,3 S I g6~ I ~ee

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