Prescription Drugs Add To Medicare Expense Woes

NCPA Research Shows Outlook is Bleak and Getting Worse

DALLAS (July 23, 2002) — The cost to taxpayers of supporting Medicare in the future will soar if Congress adopts either the Democratic or Republican proposals to add a prescription drug benefit, according to the National Center for Policy Analysis (NCPA).

"The retirement of the baby boomers is going to cripple Medicare," said John C. Goodman, NCPA president and co-author of a just-released report. "The prescription drug benefit proposals before Congress will only make the situation worse."

Even without reform, the financial future of Medicare is scary according to a new NCPA study.

  • By 2030, about the mid-point of baby boomer retirement years, one of every five dollars of income tax revenues will be required just to make up the annual deficit in Medicare.
  • By 2050, when today's teenagers reach retirement age, Medicare's annual deficit will require one of every three income tax dollars collected.

"Adding a prescription drug benefit, although it may be desirable, increases the taxpayers' burden," said co-author Andrew Rettenmaier, associate director of the Private Enterprise Research Center at Texas A&M, and co-author of the study. Among the estimates:

  • The GOP drug benefit passed by the House of Representatives will raise Medicare's claim on other revenue to more than one-fourth of income taxes by 2030 and 40 percent by 2050.
  • The House Democrats' plan will raise Medicare's deficit to more than one-third of income taxes by 2030, and more than one-half by 2050-with Medicare requiring more than one tax dollar for every two collected.

Some of the increase in Medicare costs is due to expenses for drugs growing faster than health care generally, according to the NCPA estimates.