Prescriptions for Disaster

The Medicare drug program's hassles are only beginning.


"We will get through it," a pharmacist told The New York Times as the new Medicare prescription drug benefit kicked in, "but at the moment, it's an awful mess."

He was referring to the procedural hassles associated with verifying patients' coverage under the drug plan, which began operating this week. But "an awful mess" is also an apt description of the plan's fiscal impact, which will only get worse.

Unlike the transitional confusion patients and pharmacists are dealing with now, the impending financial collapse of Medicare, a problem the drug benefit has substantially worsened, is not something we can simply endure. It will require onerous taxation, dramatic cuts in Medicare benefits, or even more dramatic cuts in the rest of the federal budget.

According to the 2005 report from Medicare's Board of Trustees, the program's unfunded obligations—promised spending not covered by revenue from payroll taxes, premiums, and co-payments—total nearly $30 trillion during the next 75 years. Former trustee Thomas Saving estimates that maintaining Medicare in its current form will require one-third of federal income taxes by 2025 and more than half by 2045.

As Heritage Foundation analyst Derek Hunter notes, the drug benefit accounts for almost 30 percent of Medicare's unfunded liability. This reckless expansion of the welfare state was sold as a way of helping senior citizens who couldn't afford the ever-more-expensive drugs their doctors prescribed. Guess what? Taxpayers can't afford them either.

Young people are supposed to be the ones with short time horizons, running up debt without thinking about the long-term implications. But in the political realm, it's the older and supposedly wiser who demand more and more for themselves, heedless of the burden they're imposing on their children and grandchildren.

The baby boomers who run the federal government were happy to win political points by encouraging this ignoble tendency, knowing they'd be safely out of office, enjoying taxpayer-subsidized drugs, before the worst consequences of their handiwork materialized. Members of Congress allowed themselves to be hoodwinked by the Bush administration's promise that the drug benefit would cost $400 billion, tops, during its first decade.

The fact that the official estimate included two years before the drug coverage actually began should have been a clue that something was wrong with this rosy prediction. So should the fact that it's hard to think of a single instance when the cost of a government program didn't exceed projections.

In 2004 the Centers for Medicare and Medicaid Services, whose numbers the Bush administration strove to keep under wraps until after Congress approved the drug benefit in November 2003, put the program's 2004–2013 cost at $534 billion, more than a third higher than the Congressional Budget Office projection favored by the White House. Last February the centers estimated the cost during the first decade when drug coverage is really up and running—i.e., beginning now—will be $724 billion, more than 80 percent over the advertised price.

During its second decade the drug benefit's cost could hit $2 trillion. Throughout that period, President Bush and the congressional leaders who helped him create this monster, Tom DeLay and Bill Frist, will get prescription drugs at taxpayers' expense.

Do these guys, all of whom are a lot wealthier than I am, really need my help to pay their pharmacy bills? Probably not, and I'd venture to say that neither do Bill Gates and Warren Buffett, but they're eligible for the subsidy too.

Worse, as the Joint Economic Committee noted in 2003, three-quarters of Medicare recipients already had some form of drug coverage before Congress approved the new benefit. It would have been a lot cheaper to aim the subsidy at people who actually needed it to pay for their medicine. But that would have meant admitting Medicare is welfare, not insurance—a truth politicians are willing to spend trillions of other people's dollars to avoid.