Let's Hope For Gridlock

Among right-thinking people, political gridlock--that is, partisan paralysis--is considered a deplorable obstacle to progressive government. To those more skeptical of Washington politics, gridlock is often a godsend. It frequently derails bad legislation. This principle would now be well applied to the wildly popular Medicare drug benefit.

In late June the Republican-controlled House of Representatives passed its proposal by a 221-208 vote, largely along party lines. Beginning in 2005, the plan would subsidize drug purchases for the 65-and-over population at an estimated cost of $320 billion for the first eight years. Democrats say the Republican plan is unworkable and too stingy. The Democratic-controlled Senate is expected to consider a more expensive plan, whose projected costs exceed $400 billion for seven years. If this passes, the best outcome would be deadlock. A House-Senate conference to fashion a single bill would dissolve in hopeless bickering.

Let it be said that, in an ideal world, a drug benefit makes sense. When Congress created Medicare--federal health insurance for those 65 and over--in 1965, coverage was modeled after private insurance plans. Typically, they didn't pay for drugs. Since then a pharmacological revolution has enlarged drugs' importance. Private insurance coverage has expanded.

As a result, Medicare is outdated. In 1999 about 38 percent of people over 65 had no insurance coverage for drugs, reports the Henry J. Kaiser Family Foundation. The remaining 62 percent had some coverage through company-sponsored retiree insurance, Medigap (private insurance bought by retirees) and a hodge-podge of government programs. For most retirees, out-of-pocket drug costs are affordable. By one survey, they averaged $584 in 1999 for those without insurance. Another estimate puts out-of-pocket costs much higher, $1,052 in 2002. Even by these figures, 68 percent of recipients have costs of less than $1,000 and only 9 percent have costs exceeding $3,000.

Viewed in isolation, a Medicare drug benefit would relieve some hardship. The trouble is that it shouldn't be viewed in isolation. The bipartisan enthusiasm for a drug benefit reflects a shameless prospecting, by both parties, for votes among the elderly and near elderly. They vote more than the young and the lately young. Consider: 64 percent of those 45 to 64 voted in 2000, as did 68 percent of those 65 and over. Among those 21 to 24, only 24 percent voted, and among those 25 to 34, only 44 percent did. In 2000 about 55 percent of all voters were 45 and older.

Both parties are sacrificing the country's long-term interests for short-term political advantage. The country's interests are to curb the burgeoning costs of retirement benefits, which, given the aging of the baby-boom generation, threaten to overburden the budget. From 2000 to 2030, these benefits--mainly Social Security, Medicare and Medicaid--will roughly double as a share of national income. They're now almost 8 percent of gross domestic product (GDP). In three decades they'll reach 14 percent or more of GDP, projects the Congressional Budget Office. A drug benefit would bloat costs further.

In practice, workers--the main taxpayers--will have to pay rising subsidies for retirees. Social Security and Medicare are pay-as-you-go programs supported by current taxes and will probably stay that way. Federal spending is now nearly 20 percent of GDP. Paying for future retirement costs, even without a drug benefit, will require some combination of the following: (a) steep tax increases; (b) deep cuts in other spending, from defense to schools; (c) larger budget deficits. Too much of any of these items would be unfair to future workers (today's children) and might damage the economy.

In an ideal world, Congress and the White House would long ago have begun to mute the collision between retirees and workers. Reflecting longer life expectancies, eligibility ages would have been gradually raised. Reflecting people's ability to save for their own retirement, benefit levels would have been slightly trimmed (but not eliminated) for wealthier retirees. If these things had been done, a Medicare drug benefit for the poor and for catastrophic costs would be justified.

But except for a modest increase in Social Security's normal eligibility age, these things haven't been done. Moreover, Congress and the president won't even talk about them. In the House debate, the subject of who was going to pay for this expensive new benefit barely came up. There's an indifference that probably reflects public opinion. It surely reflects the attitude in the press, which was recently captured by a headline in The New York Times: why the elderly wait... and wait.

A drug benefit is widely viewed as a worthy entitlement. Hardly anyone wants to think about long-term costs. This is a radioactive subject that right-thinking people simply refuse to debate. Given the indifference and, yes, stupidity, the best that can be hoped for is that Congress and the president won't make the country's future problems worse. A.k.a. gridlock.