TCS Daily

Prescription Drug Hell

By Ramesh Ponnuru - June 13, 2003 12:00 AM

Washington is about to create a new budget-busting entitlement, one that will damage America's health and its economy. Personally, I blame Monica Lewinsky.

In the 1998 congressional elections, the Democrats' share of the senior vote slipped. That result was widely thought to reflect older voters' disgust with President Clinton's sex-and-perjury scandal. As a way of winning seniors back, the Democrats started to push for federal subsidies to cover their prescription drug costs. Democratic rhetoric had America's seniors skipping meals to afford medicine. In reality, the cost of drugs is a serious problem for a small subset of the elderly population. But it is an annoyance and source of anxiety for many more people. Baby boomers worry about whether they will be able to afford medicine when they retire, and whether they will have to pay for their parents' drug costs.

Having Medicare pay for seniors' medications polled extremely well from the beginning, even among self-described conservative Republicans. Republican politicians generally thought that expanding Medicare in this way was a bad idea. They thought that it would cost much more than advertised. When Medicare was itself created in 1965, it was projected that it would be spending $12 billion by 1990. That prediction was off by a factor of 10 (even adjusting for inflation). Republicans also worried that federal subsidies would inevitably lead to de facto price controls. Medicare has tried to contain costs by using its purchasing power to drive down prices. A federal drug program would almost certainly do the same thing - and, in the process, drastically reduce the incentive for pharmaceutical companies to develop new drugs.

But as much as they believed these things, the Republicans believed the polls even more. They instantaneously acquiesced in the idea that Medicare should provide prescription drug coverage. While running for president, George W. Bush joined this new consensus. He insisted, however, that the expansion of Medicare should be coupled with a free-market reform of the program that would improve its quality and contain its costs. The prospect of drug coverage would be the political sweetener that made the medicine of reform go down; and to get the best drug coverage, seniors would have to leave the traditional Medicare bureaucracy for the new market-oriented alternatives.

Republican strategist Ed Gillespie explains Bush's position this way: "Democrats have made the point, which Republicans will now concede, that if you were to set the [Medicare] system up today rather than in 1965 you would have a prescription drug benefit. That's true. But it's also true that if you were to set the system up today, you would reflect the health-care marketplace of today."

Congressional Republicans are less committed to Medicare reform than the president. Their strategy - shared to some extent with the White House - has been to appear supportive of drug coverage while hoping that something would stop it from happening. Mainly, they hoped that Democratic partisanship would come to the rescue: that Democrats would block legislation in order to keep the issue of prescription drugs alive and to deny Republicans the opportunity to crow about delivering on their promises.

For a while this worked, and both parties were able to trumpet their notional support for drug coverage while not really wanting anything to pass. But this was a dangerous game, and it is now nearing an end. The Republicans in both houses of Congress appear to have ditched the second half of Bush's expand-and-reform formula for fear of the political risks. Their plan contains price controls in embryo, and the market elements that remain are to be regulated to death.

Ted Kennedy, still the Democrats' point man on health care, has blessed a bipartisan deal in the Senate. He is willing to trade the Democrats' short-term interest in denying Bush a prescription-drug bill for their long-term interest in increasing Americans' dependence on the federal government. This time, the Democrats are not going to save the Republicans from themselves.

"We'll expand it over a period of time," says Kennedy, and there is no reason to doubt him. Expansion is what entitlements do best. Nancy-Ann DeParle, who ran Medicare during Clinton's second term, says she would prefer the bill to be more generous, but says that Democrats "should also remember that there will be time to repair it, and more political support, once the bill becomes law - as the history of past programs shows."

What is even more depressing is that even in the unlikely event that the drug bill fails, the drug companies will still face the threat of a regulatory assault by the state attorneys general and the trial bar. "If the litigation industry has its way, the pharmaceutical industry will, under the threat of financial ruin, turn itself into a public utility," writes Michael Greve of the American Enterprise Institute. "It will, in that entirely possible event, have all the innovative oomph of, say, Pacific Gas & Electric." The industry, for all the money it spends on lobbying and advertising, seems entirely unprepared for the battles it faces.

So we had all better hope that there is something to alternative medicine and faith healing. Thanks, Monica.

The writer is a senior editor at National Review.

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