Banking on Death: Or, Investing in Life: The History and Future of Pensions
That the US has adopted a more and more constricted view of the uses of government is especially evident in the recent debate over a prescription drug plan for the elderly. After bitter negotiations to reconcile the House and Senate versions of the legislation, a bill was reported on November 17 to Congress for a vote. If it passes, it will be the most expensive addition to federal health care since the 1960s. Even so, at a projected cost of $400 billion over ten years, it is widely considered inadequate. Medicare, the federal health plan for the elderly, now reimburses recipients almost exclusively for drugs administered in hospitals. But the costs of outpatient prescription drugs for the average Medicare beneficiary are reaching punitive levels. Out-of-pocket costs are expected to rise from $644 a year in 2000 to $1,454 in 2006. Even with $400 billion, the new legislation will reimburse only about one third of the beneficiaries’ total out-of-pocket drug costs,1 and the program will not even begin until 2006. The current bill will also make it possible to impose a limit on future increases in Medicare expenditures and create tax-free savings plans for individuals to pay for private services.
In a clear sign of the times, the new federal program will be administered privately. Both the plan originally passed by the House as well as the Senate plan, backed by many Democrats, had the prescription drugs distributed not by government but entirely by private insurance companies or specialized drug distribution firms. Even Senator Edward Kennedy, long the nation’s leading defender of government-run social welfare, agreed to private distribution for the drug plan.
In a different political atmosphere, Kennedy probably would not have taken that position. The government could have administered the distribution of drugs, for example, and reimbursed beneficiaries for their use; it could also have used its buying power to negotiate lower prices for drugs instead of leaving it to the free market. But given the prevailing ideology of the Republicans in control of Congress, Kennedy believes that supporting private distribution of drugs is the only way to get any drug bill for the elderly at all, even if it allocates only half the funds he thinks necessary. “This private-sector delivery system was not the Democrats’ first choice, but it was a reasonable compromise with a Republican Congress and a Republican President,” Kennedy has said. Some of his Democratic colleagues, such as Senators Jay Rockefeller, John Kerry, and John Edwards, have refused to support the plan. And Kennedy has said he will not vote for a bill that contains a limit on future spending.
The intricacies of such legislative battles as the one concerning drugs for the elderly have distracted Americans from recognizing the scale of change that is now being proposed. Over the last twenty-five years, the attitude that government is often more an impediment to…
This is exclusive content for subscribers only.
Get unlimited access to The New York Review for just $1 an issue!
Continue reading this article, and thousands more from our archive, for the low introductory rate of just $1 an issue. Choose a Print, Digital, or All Access subscription.