Medicare Madness


WASHINGTON, DC—The great political wit H.L. Mencken once noted, "The whole aim of practical politics is to keep the populace alarmed…by menacing it with an endless series of hobgoblins, all of them imaginary." This election year politicians are keeping us alarmed about the plight of senior citizens, who they claim are poor, alone, and unable to pay for their prescription drugs.

House Republicans recently passed a government-subsidized prescription drug plan that is sure to fail on the odd chance it actually becomes law. Congressional Democrats and President Clinton are pushing for a comprehensive plan that, like the Medicare system to which they insist it be attached, will one day bust the budget. No one is asking the obvious question: Do America's seniors need this new government program?

The answer for most seniors is a flat-out "No." But the push for a government drug benefit has virtually nothing to do with seniors' economic status or the shape of their health coverage. And it has virtually everything to do with their voting status: Seniors have a higher voter turnout (70 percent) in presidential elections than any other segment of the population.

Senior citizens are America's most thoroughly insured group. They are all entitled to Medicare, which covers doctor visits and hospital care. While Medicare only covers prescription drugs consumed at a hospital, four in five seniors already have coverage for drugs, either through private insurance or a managed-care plan. House Democrats spent much of last year commissioning studies on the prices seniors pay for prescription drugs, an effective ploy that amassed press coverage back home and shined the spotlight on the high price of some prescription drugs. Yet seniors spend a surprisingly small portion of their total income–3.2 percent–on drugs, according to the Bureau of Labor Statistics. To put this figure in perspective, seniors spend, on average, 5.3 percent of their income on entertainment.

Then there's the distinction between "income" and "wealth." Once a person retires, their income generally drops. This is reflected in the fact that seniors have lower household incomes than other Americans, earning $20,761 per year, compared to the median overall household income of $37,005. This does not, however, make them poor. After a lifetime of working and saving, seniors have stores of wealth with an average net household worth of $103,608, far surpassing any other age group with comparable income. Sixty-five percent of seniors own their homes outright.

It's reasonable to expect older Americans to spend more than younger Americans on pharmaceuticals, just as we would expect them to spend less on clothes for work, baby formula and diapers. There's nothing surprising or wrong with this.

And, as the number of conditions that are curable or treatable with the help of new drugs increases, it's natural that people in general choose to consume more drugs. This is true of all new goods in an economy and is usually seen as a sign of progress, not of problems. Expenditures on PCs and computer software increased in the wake of the high-tech revolution and no one called for legislation. The rapid development of technology and the fact that it makes our everyday lives more efficient and enjoyable means these expenses provide opportunities to live more fulfilling lives, not unfair burdens.

This isn't to say that Medicare is perfect. It's an old-fashioned, top-down government program more appropriate for the age in which is was designed and passed–the 1960s–than the technology driven 21st century. Unfortunately, President Clinton decided to play politics, rather than focus on constructive policy, when he rejected his own commission's 1999 recommendation for restructuring Medicare–a fix that included a voluntary prescription drug benefit in the context of a more market driven program.

It's too late for that now. The serious task of reforming Medicare, drug benefits and all, will fall on the next president and Congress. Hopefully, they'll take the time to do it right.