Medicare reform gone bad

Bruce Bartlett
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Posted: Mar 05, 2004 12:00 AM

 Last year, when Republicans rammed a new Medicare drug benefit through Congress, I warned that they were unlikely to get the political boost they were expecting.  Now, just 3 months after the legislation was signed into law, many now realize--too late--that I was right.

 In a Dec. 5 column, I had this to say:   "I believe that Republicans have not only made a serious policy error in enacting a new drug benefit, but a political one as well. Whatever short-run gain they have made will melt away once the costs explode--which they will.  Any future Republican effort to restrain those costs will completely reverse this temporary gain.  In the end, only Democrats gain politically from entitlement programs."

 Since then, we have learned that the Bush Administration knew the drug bill would cost $534 billion over 10 years, instead of the $400 billion Congress thought it was voting for.  According to press reports, the administration suppressed its cost estimate in order to allow the legislation to pass.  It knew that if the cost were much above the $400 billion figure estimated by the Congressional Budget Office, the legislation would fail.  While CBO stands by its estimate, I continue to believe that the true cost will be well above $534 billion.

 One reason why I thought Republicans were being foolish is that the elderly, whose votes they thought they were buying, have such outlandish expectations of what they are owed by society that they were impossible to fulfill.  In other words, they were guaranteed to be disappointed by whatever drug program was enacted, no matter how generous.  This is confirmed by poll data.

 Every poll taken since the drug bill was enacted shows a distinct lack of enthusiasm for it on the part of the elderly.  As John Harwood of the Wall Street Journal observed in a March 3 column, "Seniors have become the law's most conspicuous critics.  In the most recent Wall Street Journal/NBC News poll, those 65 and over were the only age group to express plurality opposition.  Their support for the Republican Party's handling of the issue, and for Mr. Bush's re-election, declined since last summer."

 As a consequence, growing numbers of Republicans who voted for the drug bill now wish they hadn't.  Senator Lindsey Graham (R-SC) spoke for them when he told the Washington Post on Feb. 29, "There is buyers' remorse among many who voted for it."  Although Senator Graham voted against the bill, he says he has encountered no criticism from his constituents for doing so.

 Democrats have noticed the disconnect between Republican expectations for political gains from the drug bill and the political reality.  "Republicans thought they were going to get a big political bang.  They've got a dud.  Unless they turn perceptions around, they've got an anchor around their neck," said Rep. Rahm Emanuel (D-Ill.), who was a top political operative in the Clinton White House.

 One reason for the remorse is that congressional Republicans are now trying to draft a budget and discovering that they've got a serious problem on their hands.  The nation's fiscal problem is bad and getting worse, as documented by a new Treasury Department report.  Just released, the Financial Report of the United States Government for fiscal year 2003, which ended last Sept. 30, shows that the federal government's total indebtedness rose by $3.5 trillion last year.  And this was before the drug bill was enacted.

 According to the Treasury report, the federal government's total indebtedness, including the future cost of entitlement programs, rose from $31.1 trillion at the end of fiscal year 2002 to $34.8 trillion at the end of last year.  Almost all of the increase was due to rising costs for Medicare.  Yet economist Joseph Antos of the American Enterprise Institute estimates that the new drug bill will add $13 trillion to this figure.  David Walker, comptroller general of the United States, thinks the number may be as high as $8 trillion.

 Furthermore, it is only a matter of time before Democrats start hammering Republicans for the huge corporate subsidies in the drug bill that were included to keep businesses from dropping their existing retiree drug coverage.  A March 2 Wall Street Journal report said these 6 big corporations alone will be receiving $2.5 billion in taxpayer subsidies (in millions): BellSouth ($572), Delphi ($500), U.S. Steel ($500), American Airlines ($450), John Deere ($300-$400), and Alcoa ($190).

 Liberal commentator Matthew Yglesias warns that Republicans have transformed Medicare "into a pork barrel project for GOP donors."  It's bad for the budget and bad for seniors, he says, but "great for corporate profits margins."  That is because the subsidies relieve businesses of a contractual obligation they already have.

 In the end, Republicans will lose far more votes from this legislation than they gained.