The Medicare Vote
Late June offered a major test of principle for members of Congress, as a new, costly entitlement was being voted on – prescription drug coverage under Medicare.
The economics of this issue are quite ugly, and the politics turn out to be rather messy as well.
Adding drug coverage to Medicare has been projected to cost $400 billion over the next ten years. Of course, in the real world, such cost projections are complete fiction. Just like putting a dollar figure on a tax cut over a decade, it’s pure guesswork. And when it comes to projecting the costs of a new government program, the guess is usually grossly underestimated. So, if this Medicare program is implemented and eventually expanded, costs to the American taxpayer – both individuals and businesses – will mount.
For good measure, increased third-party payments mean that fewer consumers and providers will be concerned about the price of drugs, and utilization will rise. These factors add greater impetus to driving costs higher.
Government’s inability to control costs will put the pharmaceuticals industry on the path to price controls. That’s bad news for everyone. Incentives to invest in researching, developing and producing new medicines – an enormously costly endeavor -- are vastly diminished, as price controls limit potential returns.
Unfortunately, both political parties – Democrats and Republicans – back this huge and dangerous expansion of government. President George W. Bush is pushing the issue, even though his call for a commensurate major overhaul of Medicare basically has fallen on deaf ears. Many congressional Republicans are following their President in the hopes of taking an issue away from the Democrats for the upcoming 2004 elections.
Meanwhile, the Democrats in Congress pretty much like anything that will expand the size and scope of government. However, in this case, Democrats in significant numbers are opposing the current legislative effort. They apparently are uneasy with the fact that a Republican President is driving this issue forward, do not like the idea of private insurers being the vehicle for offering drug coverage, and have argued that this legislation does not spend enough money.
So, no one seems all that interested in the issue’s truly ugly ramifications, that is, the ill effects on the budget, taxpayers, the economy, the pharmaceuticals industry, and the long-term health of Americans and others around the globe who rely on the innovation and inventiveness of U.S. prescription drug firms. Well, almost no one.
The Senate passed their version of Medicare prescription drug coverage by a vote of 76 to 21, and the House of Representatives bill passed by just one vote – by 216 to 215. Many of these votes reflected political partisanship more than anything else.
However, it is worth noting that 10 Republican senators and 19 Republicans in the House voted against the general wishes of their party’s leaders. For good measure, these GOP “no” votes – whether specifically intended to be so or not by the individual members – were in fact a vote against a massive and unwise expansion of government. Last time I checked by political parties philosophical handbook, that’s what Republicans are supposed to do.
Who knows, maybe when another Medicare prescription drug vote comes around this year, after a compromise is hammered out between the Senate and House versions in conference, more Republicans will discover the courage of their convictions, and vote against big spending, more taxes and price controls. For both the physical and fiscal health of our nation, let’s hope so.
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Raymond J. Keating is chief economist for the Small Business Survival Committee, and co-author of U.S. by the Numbers: Figuring What’s Left, Right, and Wrong with America State by State (Capital Books, 2000).
