Retired people and those who will retire in the next 10 years constitute a big, important part of the electorate, with whom the new plan will be very popular. By using the budget surplus to pay for poorer Americans' health care, the President is also blocking Republican moves to use it for tax cuts for the more well-off.
Under the President's plan pensioners would initially pay an extra $24 (pounds 15) a month and in exchange, the government would pick up half the cost of prescriptions up to $2,000 a year. This is much below the cost of private insurance, and the government would also pay the premiums for poorer people.
Medicare, a Sixties government initiative to pay for health care for retired people, covers hospital care but not prescriptions. Expanding it is popular with most politicians, although they differ about how it should be done. There is a good case for the prescriptions plan. One- third of old people lack private insurance to cover the cost, and making medicines more readily available would help to reduce the need for hospital care.
"We can't afford not to introduce prescription-drug benefits into the Medicare programme," said Donna Shalala, health and human services secretary yesterday. But some politicians want to expand it only to poorer people, fearing more financial problems from a more general increase. Others believe the plan would undermine private healthcare schemes. "I can't understand why we would want to drive those private programmes out," said Phil Gramm, a Republican senator.
The other problem with which the President is grappling is that Medicare is going broke. When the baby-boom generation retires, millions more people will be entitled to claim hospital care under its benefits, with the number of people eligible doubling by 2002. But the number of workers paying into its funds will fall. So Mr Clinton proposes to use the accumulating federal budget surpluses over the coming decades to prop up the fund. Some $800bn would be paid into Medicare in the next 15 years, most of it to pay for the expected deficit.
The new prescription benefits would be paid for with the rest of the surplus and by savings in the rest of the programme. The arithmetic looks wobbly, since the figures depend on some heroic assumptions about the economy.Reuse content