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There's No Such Thing as Free Prescription Drugs

November 01, 2000|DANIEL N. SHAVIRO | Daniel N. Shaviro, a law professor at New York University, is author of "Making Sense of Social Security Reform" (University of Chicago Press, 2000)

Perhaps no element of the 2000 presidential campaign has been more outrageous--or even disgusting--than the two leading candidates' headlong rush to top each other in promising seniors a generous new prescription drug benefit through Medicare.

In Al Gore's version, the benefit would potentially cost more than $300 billion over the next 10 years, and George W. Bush, if elected, likely would face political pressure to liberalize his plan in that direction.

In the presidential debates, the candidates tried to sound as if they were offering free prescription drugs to seniors, while in fact the actual details of their plans are somewhat less generous. Yet what both candidates propose would greatly expand our Medicare commitments at a time when projections show that the program is already headed for insolvency. The recipients, even as a group, are not expected to pay for the new benefits that they would be offered.

Who actually is going to pay for the new prescription drugs benefit, if seniors do not, is something that neither candidate cares to specify. Prescription drug coverage cannot be provided for free, of course. The costs merely can be transferred to someone other than the beneficiaries. In the long run, younger or even as-yet-unborn Americans are the most likely candidates to pay, although it is also possible that price controls, likely with a deleterious long-term effect on investment in drug research, will play a part in absorbing the costs.

What makes the pell-mell rush in the direction of offering free prescription drugs so outrageous is that it treats the needs of one segment of our population--a key voting bloc, of course--as more urgent than those of everyone else.

Does Warren Buffett, for example, need free prescription drugs? Bill Gates' dad? Gore repeatedly has criticized the tax cuts that Bush's plan would offer wealthy Americans. Certainly we should be concerned about the relative treatment of rich and poor Americans by our tax and transfer systems. Why, however, should poorer Americans have to pay (tomorrow if not today) for affluent seniors' prescription drugs? And how can Gore reconcile his frequently expressed concern about wealth distribution with his unwillingness to include an income limit in his proposal?

Let's concede three points partly in favor of the free-prescription-drugs mania. First, many of the people who would benefit genuinely are in need. Second, needing prescription drugs--just like having more mouths to feed in a low-income household--is indeed relevant to overall need. Third, Medicare at present may be irrationally designed in how it treats prescription drug expenses relative to other aspects of health care. But this does not mean that indiscriminately throwing money at what is in general the most affluent and (by government) generously treated segment of our population makes sense.

Instead, let there be true insurance, which seniors as a group pay for on an actuarially fair basis. That would emphasize covering unusually high expenditures, not those that are run of the mill. The current drug proposals simply are not fair to all other Americans, including the as-yet unborn, even if it is great presidential politics.

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