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Big Government Prescription Drug Benefit Entitlement Program Passes the House

For Immediate Release. July 1, 2002At one time, Americans could depend on Republicans to oppose the expansion of big government entitlement programs that transfer wealth from one socio-economic group to another.  However, the socialization of the American society has continued to advance with Republicans in Congress who follow President Bush’s example of becoming a pseudo-democrat as they target special interest groups to attract voter support for their re-election this fall.  On June 28, 2002, in what could be the largest expansion of Medicare since its inception in 1965, the House of Representatives passed a Republican measure on a 221 to 208 vote to provide prescription drug benefits to millions of elderly people.

According to the bill, the government would pay subsidies for the insurance covering drug costs to induce insurance companies to offer such coverage that currently does not exist.  Beneficiaries would have to pay about $33 monthly in premiums with an annual deductible of $250 dollars.  Annually, from $251 to $1,000 Medicare would pay 80 percent of the prescription cost and from $1,001 to $2,000 would pay 50 percent of drug costs.  For all drug costs between $2,001 to $3,700, beneficiaries would be responsible for all prescription costs.  All prescription drug costs beyond this limit would be covered by Medicare.  The problem with such a program is that it will encourage physicians to over-prescribe medications so seniors can reach the $3,700 limit to make Medicare liable for the remainder of the cost.  Also, since a third party provider is paying for the cost of prescription drugs, price sensitivity of the consumer is no longer a factor and less expensive similar acting generic drugs will not be procured. This will result in higher pharmaceutical prices and eventually result in governmentally-imposed price control.   As a result, the cost of this program will be dramatically more expensive than initially projected and administration of the program will be far more difficult than legislators claimed. 

In the federal budget after Social Security, Medicare is the second largest entitlement program.  Both economically and fiscally unsustainable is the current Medicare program.  Seniors will spend an astronomical $1.8 trillion on prescription drugs between 2003 and 2012 according to the Congressional Budget Office.  To assure its solvency, dramatic and fundamental reform of the program is required, and a prescription drug benefit only compounds current problems. 

Once before, the federal government tried a prescription drug coverage program by the enactment of the ill-fated Medicare Catastrophic Coverage Act of 1988 that ended in disaster.  Unfortunately, as with so many government entitlement programs, it was far more difficult to administer than claimed, far less appealing to the millions of seniors once enacted as a result of sticker-shock effect on their pocket books, and dramatically more expensive than originally projected.

“Before adding a prescription drug benefit that will only worsen the current Medicare system, Washington needs to offer America’s elderly a program such as Congress’ own health care plan known as the Federal Employees Health Benefits Program (FEHBP),” said Dr. Joel P. Rutkowski, president of the American Voice Institute of Public Policy.  “This program is provided to all members of Congress and millions of federal employees and retires, as well as their dependents, a system of health care based explicitly on the free-market principles of competition and consumer choice.”

For Interviews Contact:

Joel P. Rutkowski, P.h.D.
President, The American Voice Institute Of Public Policy

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