« Bill Clinton: American Engagement | Main | NBER Papers on Declining GDP Volatility and the Bias in the CPI »

Wednesday, November 23, 2005

The Medicare Drug Benefit Disaster

Robert Samuelson agrees with Paul Krugman on the economics and politics of Medicare:

Drug Benefit Disaster, by Robert J. Samuelson, Washington Post: Good policy can make for good politics, and bad policy can make for bad politics. Republicans may be about to discover this truism with their Medicare drug benefit... scheduled to take effect in January. As policy, the drug benefit is a calamity. It worsens one of the nation's major problems (paying baby boomers' retirement costs) while addressing a nonexistent "crisis" (allegedly oppressive drug costs for retirees). Its purpose was mostly political: to bribe the elderly or soon-to-be-elderly to vote for Republicans in 2004. Now it may backfire on Republicans. ... Here, Republicans created grief for themselves. They rejected a simple add-on of drug coverage to Medicare. Instead, they preferred a "market-based" system that has private insurance companies offer plans that are, in turn, subsidized by Medicare. Congress set a minimum benefit ... and invited insurers to provide that plan or something "actuarially equivalent." The result: many plans -- and much confusion. In 46 states, Medicare beneficiaries can choose from at least 40 plans, reports the Kaiser Family Foundation. People feel overwhelmed. It's hard to compare plans... One monthly premium is $1.87, another $99.90. ...

For Republicans, there's a second political problem -- outrage among conservatives over the new spending and the biggest expansion of Medicare since its creation in 1965. From 2005 to 2015, the drug benefit will cost $858 billion, estimates the Congressional Budget Office. Similarly, many conservatives ridicule the role of private insurance companies. "This is not a market-based system. It's central planning," says Robert Moffit of the Heritage Foundation. ... Republicans deserve the backlash, because their motives were so blatantly political. ... [T]he drug plan's features confirm its political nature. First, Republicans declined to pay for it; most costs (literally trillions of dollars) must be covered by borrowing or future tax increases. Second, there's the "doughnut hole" -- the standard benefit provides coverage up to $2,250 of drug costs and then no coverage for the next $2,850. Of course, this makes no sense as health or social policy. The purpose was political: to provide benefits for lots of people while limiting total costs. ...

This administration reminds me of the comic-strip husband turned plumber who invariably, while trying to fix a leak, ends up flooding the basement and making things worse. Even when there are problems that everyone wants fixed, you are reluctant to turn this group loose with the pipe wrench.

    Posted by on Wednesday, November 23, 2005 at 02:21 AM in Economics, Health Care, Politics | Permalink  TrackBack (0)  Comments (17)

    TrackBack

    TrackBack URL for this entry:
    https://www.typepad.com/services/trackback/6a00d83451b33869e200d83461c8f853ef

    Listed below are links to weblogs that reference The Medicare Drug Benefit Disaster:


    Comments

    Feed You can follow this conversation by subscribing to the comment feed for this post.