AN UNNECESSARY PRESCRIPTION
Mar 22, 1999, Vol. 4, No. 26 • By ROBERT M. GOLDBERG
EVER SINCE PRESIDENT CLINTON proposed adding a prescription-drug entitlement to Medicare in his State of the Union speech, drug coverage for the elderly has been the number-one health issue for Democrats. The Democrats on the National Bipartisan Commission on the Future of Medicare are pushing for universal prescription-drug coverage for seniors, and congressional Democrats including Barney Frank, Henry Waxman, and Ted Kennedy have proposed at least four bills creating such a benefit. Another bill, sponsored by representative Tom Allen, would allow pharmacies to buy drugs for seniors from the Federal Supply Schedule -- the government version of Price Club, which gives a 40 percent discount off of wholesale prices.
The rationale for all of these proposals is the claim that because Medicare does not cover prescription drugs, seniors spend every dime they have on medication. In introducing the Prescription Drug Fairness for Seniors Act, Tom Allen said, "It is time for Congress to assure that no older American anywhere has to choose between buying medicine or food, between paying their electric bill or their drug store charge account, between taking their medicine or living in pain and anxiety." Administration spokesmen and Democrats in Congress imply that large numbers of seniors are facing this dire choice. They cite, for example, the claim by the Families USA Foundation, a liberal lobbying group, that 13 percent of seniors are forced to choose between buying food and medicine. But data from the government's National Health Interview Survey of 1994 show that less than 2 percent of seniors had difficulty getting needed prescription drugs.
Meanwhile, the government's Consumer Expenditure Survey says the average senior spends $ 500 a year on prescription drugs, a lot less than on restaurants ($ 1,160), home furnishings ($ 1,032), clothing ($ 1,093), entertainment ($ 1,141), or health insurance ($ 1,494). The survey puts the average annual disposable income of seniors at approximately $ 25,000, which makes prescription drugs only 2 percent of total expenditures. Even the poorest senior citizens report spending less on drugs than on dining out. When Democrats claim the elderly must choose between food and medicine, they should distinguish between eating in and dining out.
These averages, of course, conceal some actual hardship, but it affects a small portion of the elderly. This is not surprising, since most seniors already have some prescription-drug coverage. Nearly three-quarters have a drug benefit through their HMOs, private health plans, Medicaid, or state-run plans. And since the majority of seniors still spend less than $ 2.00 a day on drugs, some simply pay out of pocket. Such hardship as occurs, moreover, is likely to diminish: The National Bipartisan Commission on the Future of Medicare points out that in the future, "the elderly will have more income and assets than today's elderly even when the effect of future inflation is removed."
If the problem is so modest, then, why create a big entitlement projected to cost the government $ 40 billion a year? As with other Democratic health initiatives, the idea is to extend government control over health care one benefit at a time. Prescription drugs are the biggest increment still waiting to be brought under the net of government coverage. Clinton included prescription-drug benefits in the comprehensive health plan he proposed in 1993. The cornerstone of his proposal was price controls on all drugs administered by any health plan, including Medicare.
All of the current Democratic proposals contain price controls. Their advocates call these "discounts" and argue that seniors have the same right to obtain "discounts" from drug companies as managed-care organizations like the Veterans Administration and Medicaid. Set aside the fact that price controls and the 40 percent price cut Allen proposes would kill research and development in pharmaceuticals. Under the Allen bill, the discounts go to pharmacies, including big drugstore chains such as CVS, not seniors. Pharmacists will charge whatever retail price they want.
For Republicans, the right response is not a watered-down version of a Democratic entitlement. Instead, what is required is to improve coverage for the neediest. In 1997, almost 60 percent of Medicare beneficiaries with incomes below the federal poverty threshold (about 1.5 million seniors) were eligible for Medicaid but were not enrolled in the program. Local councils on aging and Social Security offices should be enlisted to step up efforts to enroll these people. Medicaid would meet most of their prescription-drug needs. Second, Medicare should provide the seniors who are in poorest health with vouchers, adjusted by income and severity of illness, to use to buy care that includes coverage for drugs. These reforms would require minimal outlay and no new regulations. Best of all, they would solve the real -- as opposed to the politically invented -- problem of helping the truly needy elderly pay for medicine.
Robert M. Goldberg is senior research fellow with the Program on Medical Science and Society at the Ethics and Public Policy Center in Washington, D.C.