Medicare's Worsening Balance Sheet Means Congress Must Re-Think Costly Drug Plan, Taxpayer Group Contends

3/23/2004

From: Pete Sepp or Annie Patnaude, 703-683-5700, both of the National Taxpayers Union

WASHINGTON, March 23 -- A new government report on Medicare's huge liabilities and looming bankruptcy are just two more reasons why Congress should consider revising the recent prescription drug law, according to the 350,000-member National Taxpayers Union (NTU). Today NTU joined dozens of citizen groups and think tanks comprising the Coalition Against Higher Medicare Drug Costs on behalf of taxpayer-friendly alternatives to the expensive entitlement scheme enacted in 2003, but yet to take effect.

"Medicare's own Trustees have confirmed what taxpayer advocates warned about all along," said NTU President John Berthoud. "A 35 percent increase in the drug plan's ten-year cost estimate, mounting evidence that employers will dump seniors' private coverage, and now today's Trustees' report all add up to a economic doomsday scenario that thoughtful policymakers can't ignore any longer." Berthoud noted that full federal drug coverage won't kick in until 2006, meaning that "lawmakers have only a limited amount of time to prevent what could be the biggest fiscal disaster in U.S. history."

Long before the Trustees' report and current controversy over the Medicare prescription drug plan, policymakers had ample evidence of the fiscal challenges facing a new Medicare entitlement. NTU's research affiliate, National Taxpayers Union Foundation (NTUF), released an August 2003 study that warned by 2075 a Medicare program that includes drug coverage could devour one-third of the Gross Domestic Product, which could prompt a level of deficit spending not seen since World War II.

NTU recommends that Congress revise the bill with a focus on systemic Medicare reform that will empower consumers, reduce government control over health care decisions, and avoid mechanisms like price controls. Such an approach would include expanded Health Savings Accounts for individuals (one of the only desirable features in the bill), equal tax treatment for health insurance purchased outside of one's employer, and tax credits for the uninsured.

"Fifteen years ago, Congress pulled America back from the fiscal abyss when it repealed the flawed Catastrophic Care law before it could exact a terrible toll on seniors and taxpayers," Berthoud concluded. "Now policymakers should draw upon this historical lesson to protect America from the $8-trillion mistake of a federal prescription drug entitlement."

NTU is a non-partisan citizen group founded in 1969 to work for lower taxes, less wasteful spending, and accountable government. NTUF Policy Paper 143, Dangerous Interaction, along with two NTU- organized coalition statements in opposition to the prescription drug entitlement, can be accessed at http://www.ntu.org.