March 22,2001

Grassley Takes Careful Approach to Prescription Drug Coverage

WASHINGTON – Adding a prescription drug benefit to Medicare should be done in thebroader context of modernizing the program, Sen. Chuck Grassley, chairman of the Committee onFinance, said today.

“While adding prescription drugs may be one of the most visible improvements to Medicare,it’s clearly not the only modernization necessary,” Grassley said. “We have an opportunity tostrengthen and improve Medicare overall. And we owe it to the people who rely on Medicare, to theproviders who strive to deliver high-quality care, and to the taxpayers who must foot the increasingcosts of the program, to do that.”

Grassley’s comments came after a hearing that explored Medicare’s financial condition andthe cost of prescription drug coverage. The latest findings include:

< Now, there are four workers for every Medicare beneficiary. By 2030, there will be only 2.3workers per beneficiary. Baby boomer retirement will result in a doubling of beneficiariesby 2030. Therefore, as more beneficiaries enroll in Medicare over the next several decades,there will be fewer workers paying taxes to cover benefits.

< Medicare’s trustees’ report that to bring Medicare into balance over the next 75 years,benefits would have to be cut by 37 percent or revenues would have to be increased by 60percent. That’s without adding a new prescription drug benefit.

< An accounting of Medicare’s financial condition must consider spending in both parts of theprogram -- Parts A and B -- rather than just Part A, especially since Part B is growing at fivetimes the rate of Part A. Some observers fail to take in the whole picture, an approachGrassley said is intellectually dishonest.

< No one can be sure how much a prescription drug benefit will cost 10, 20 or 30 years fromnow. The Congressional Budget Office recently issued its new baseline estimate for drugspending by the Medicare population under current law, and it’s sharply higher than lastyear’s baseline. This level of uncertainty in drug cost projections makes it imperative thatCongress is fiscally responsible and proceeds carefully in adding new benefits to Medicare.

Grassley said it’s important to recognize that Congress won’t shortchange Medicarebeneficiaries to provide tax cuts, as some detractors argue. Over the next 10 years, the governmentwill spend $3.8 trillion on Medicare without adding any new benefits. That’s more than twice the of any tax cut. “Prescription drug coverage is one of many improvements to Medicare that weneed to carefully consider this year,” Grassley said. “It’s clear that we have a major challenge beforeus. But I’m committed to working with President Bush and my colleagues in the Senate and Houseto find viable solutions.”