Clinton's Medicare Plan is a Far Cry From Needed Health Care Reform

July 22, 1999

Mark Weisbrot
Houston Chronicle, July 22, 1999

Knight-Ridder/Tribune Media Services, July 6, 1999 
Fort Lauderdale Sun-Sentinel
, July 10, 1999
Houston Chronicle
, July 22, 1999    


President Clinton’s proposal this week to add a prescription drug benefit to Medicare has ruffled some big feathers in Washington.

The powerful pharmaceutical lobby doesn’t like the idea of a regular Medicare benefit that covers prescription drugs. They are afraid that the government might use the additional buying power to lower prices. “Any expansion of prescription drug coverage for Medicare beneficiaries should come through the private sector and not through the traditional fee-for-service Medicare program,” said Alan F. Holmer, president of the Pharmaceutical Research and Manufacturers of America (Phrma), when the Clinton Administration first floated its trial balloons on the issue in January.

This is sort of like an association of funeral directors opposing funding for cancer research because a cure might cut down on their business. One would think that the public relations department at Phrma– the lobby group of the big drug manufacturers– would have the political sense to be a little more discreet. They have gotten quieter since President Clinton announced his plan this week.

Unfortunately, the President has won some new enemies without doing all that much for his potential friends– the 37 million elderly and disabled beneficiaries of Medicare. The new prescription drug benefit, which would begin in 2002, is a bit stingy: it covers just half of prescription drug costs and only up to a maximum annual benefit of $1000 (increasing to $2500 in 2008). This comes at a price of an additional $24 a month (increasing to $44 in 2008).

But at least it’s a step in the right direction. The same cannot be said for some of the other proposals in the President’s plan: a 20 percent co-payment for clinical laboratory tests, and a new plan to increase competition between HMO’s and Medicare’s traditional fee-for-service program. This latter scheme will probably just add confusion and enrich some HMO’s that have mastered the art of “cherry-picking”– enrolling the healthiest senior citizens and avoiding the sick.

Of course, Medicare doesn’t need “reform” so much as it needs expansion. Its limited coverage leaves the average senior citizen spending 21 percent of his or her income on health care, with the elderly poor spending 30 percent. And it does not protect the elderly from financial ruin due to illness. Many senior citizens in need of long-term care or other expensive treatment have to “spend down” their savings and assets until they are poor enough to qualify for Medicaid, the government’s health care program for the poor.

Much of the public has been led to believe that Medicare is the main problem in our health care system, but this is based on misinformation. Medicare’s costs per person are actually projected to rise less rapidly over the next eight years than costs in the private sector. The impact of the baby boomers’ retirement has also been grossly exaggerated: as a matter of arithmetic, most of the projected increase in health care spending in the 21st century is due to price increases, not demographics.

In fact there is very little correlation between the age of a country’s population and its spending on health care. This may seem surprising, because everyone knows that people generally have more health problems as they age. But there are so many other factors that affect health care costs– most importantly, the enormous capacity for inefficiency and waste that our own corporate-run health care system has cultivated– that the effect of population aging has been drowned out.

We will not reach the age of Sweden’s population for another 25 years, yet they spend half as much per person on health care as we do. Health care eats up about 14% of our national income, while the other developed countries spend an average of  8%. And these countries manage to insure all of their citizens– unlike the United States, which has 44 million people without health insurance.

These two great problems of our health care system– the failure to contain costs and to provide for the growing numbers of uninsured– are related. They will not be resolved until we join the rest of the industrialized world and enact a system of universal health insurance. One obvious way to do this would be to extend Medicare– a system of social insurance that is much more efficient than the private insurance industry– to the rest of the population. That’s the kind of Medicare reform we really need, and sooner or later we will have it.

Support Cepr


If you value CEPR's work, support us by making a financial contribution.

Si valora el trabajo de CEPR, apóyenos haciendo una contribución financiera.

Donate Apóyanos

Keep up with our latest news