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MEDICARE PRESCRIPTION DRUG BENEFIT REPEAL SHOULD BE SOUGHT

Executive Summary

MEDICARE PRESCRIPTION DRUG BENEFIT REPEAL SHOULD BE SOUGHT by President-elect Bush in an omnibus health care reform bill, The Heritage Foundation says in health policy recommendations contained in its think-tank agenda report, "Mandate for Leadership III." To defuse what it calls the "time bomb" in the Medicare financing system, the conservativc Washington policy group urges that "the surtaxes and new drug benefits contained in the 1988 catastrophic health legislation should be repealed." The Heritage Foundation maintained in its analysis of health policy options that under the catastrophic coverage law, enacted in July 1988, "elderly couples could face income tax surcharges of as much as $2,000 by 1993. As more of the elderly become aware of the real cost of the catastrophic legislation, repeal will become an increasingly popular action for the new President to advocate." The Heritage report is circulating in Washington in draft format. A finished version will be published at the beginning of 1989. "Mandate for Leadership III" is the third set of policy recommendations developed by Heritage. The first two were issued for the Reagan victories. In the health care area, the group is recommending that the Bush Adminstration propose a comprehensive restructuring of the federal health care coverage system sometime in 1990, allowing the President enough time to build legislative and popular support for the initiative. The philosophical cornerstone of the Heritage plan is to restrain the growth in health care spending by scaling back the level of tax funded health care services provided by the federal government. Instead, a set of tax deductions would be established to encourage individual consumers to become cost conscious purchasers of their own health care services. "At the same time," Heritage says, "these tax policies would introduce effective consumer choice as the primary mechanism for forcing providers to offer quality services at competitive prices. Also, by encouraging consumers to purchase routine health care services out of pocket, health insurance companies would have incentives to concentrate on providing policies more suited to the natural function of insurance - coverage for unlikely but very expensive occurrences." In specific program areas, the group is proposing that Medicare be reformed by removing the current $564 deductible and instead requiring beneficiaries to pay a set of "front-end coinsurance rates for both hospital services (Part A) and physician services (Part B). The rates would be tapered so that the coinsurance declines as hospital and physician charges increase. Also, the Administration should establish an "opting out" system in which workers pay into private tax exempt accounts to be applied to medical expenses upon retirement. Also, a voucher system for Medicare reimbursement would be established for those choosing to remain in the Medicare program. Under the Heritage proposal, Medicaid would be "restored" to its original purpose of providing basic health care services to the nonelderly poor. Heritage recommends removing long term care provisions from the Medicaid program, and to set up separate programs for long term care and AIDS treatment. The separate programs would be administered by states and partially funded through block grants from the federal government. The Heritage Foundation's health chapter was authored by Ron Docksai, former health staffer on the Senate Labor and Human Resources Committee. Docksai has also been HHS assistant secretary for legislation (see story, below).
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