Need vs Greed

by Vogel and Coons

Prescription drugs for the old with the gold

This column appeared first in the (Tucson) Arizona Daily Star on July 13, 2003. Since it reflects our own views accurately, we recommend that you read it carefully. (The title and subtitle are ours.)

By Ronald J. Vogel and Stephen Joel Coons
SPECIAL TO THE ARIZONA DAILY STAR

Although the issue had languished since the 2000 elections, the Bush administration pushed Congress to pass legislation before the July 4 recess to add a prescription drug benefit to Medicare. Both chambers of Congress complied, and passed distinct bills that now go to a House-Senate conference committee for negotiation and compromise on the details of a unified version. This is expected to be completed by the end of the summer.

The years of inaction followed by the frenzied rush to enact something may be politically expedient, but it is reckless and irresponsible, particularly at a time when the budget deficit is reaching unprecedented levels.

By not taking the time for more deliberate and rational debate regarding the coverage, eligibility, financing and administration of the benefit, most of us in the United States, including Medicare beneficiaries, are likely to be poorly served.

Not only are the bills that were passed seriously flawed in terms of their premium and benefit structure, a critical issue that continues to be ignored is the inequity created (and perpetuated) by the imbalance in tax-supported medical care coverage.

Convenient omission of this consideration was glaringly obvious in a presentation in Tucson earlier this year by a member of AARP's board of directors. He stated prescription drug benefits should be available to everyone eligible for Medicare.

When challenged as to whether AARP could support a needs-based approach, the speaker replied that he was entitled to pharmaceutical benefits under Medicare since he had paid his taxes during his working years.

Although he didn't pay into a Medicare system with a drug benefit, he somehow feels entitled to the additional benefit. His comments reflect AARP's oft-stated position.

Webster's Dictionary defines "entitle" as "to furnish with proper grounds for seeking or claiming something." By this definition, nobody is "entitled" to 100 percent of Medicare benefits. Medicare Part A is financed with a payroll tax, part of the Social Security tax.

On average, seniors who now benefit from Medicare Part A have paid during their working lives, at best, about 35 percent of the taxes that finance it. Medicare Part B enjoys a 75 percent subsidy from the general tax fund; the other 25 percent is paid by beneficiaries' monthly premiums. Therefore, Medicare can be characterized as a very subsidized program.

The subsidies are paid by people in all earned-income brackets but, we are particularly concerned with the Medicare subsidies paid by the working poor. During the debate over lowering taxes at the federal level, everyone seems to have missed the fact that many families, about 60 percent, pay more of their income in payroll taxes, such as for Medicare, than they pay in income taxes.

The working poor pay payroll taxes on every cent of income that they earn, because these payroll taxes have no deductions or exemptions at those income levels. This is a regressive tax (i.e., the working poor pay a greater percentage of their income into it than do the working nonpoor).

Such politically powerful advocacy groups as AARP are not seeking parity or equity; they are seeking a disproportionate share of scarce resources. This is true for the prescription drug benefit for Medicare. AARP disregards other segments of the population that do not currently receive the benefits of subsidized medical care but that may be equally deserving.

Other than for the very poor, tax-supported medical care is provided only to those with political clout. Medicare is a socialized insurance plan, limited mainly to older adults.

A primary reason for having insurance, including health insurance, is to protect against catastrophic financial loss. No one should be financially ruined or forced into bankruptcy due to excessive medication expenditures. Therefore, rational public policy should ensure that the most vulnerable among us are protected from that fate.

Nevertheless, many individuals eligible for Medicare do not need to be "protected." In 1966, when Medicare began, 28.5 percent of people 65 and older in the United States lived at or below the poverty level; by the year 2000, only 10.2 percent did.

Based on the financing of Medicare and the social inequity that it already produces, we contend that for any prescription drug benefit within Medicare, financial need should dictate eligibility rather than age.

* Ronald J. Vogel is a research professor and Stephen Joel Coons is a professor in the Center for Health Outcomes and PharmacoEconomic Research in the College of Pharmacy at the University of Arizona.