A Question of Priorities

This is historical material, "frozen in time."
The web site is no longer updated and links to external web sites and some internal pages will not work.

T H E W H I T E H O U S E

A Question of Priorities

Help Site Map Text Only

A QUESTION OF PRIORITIES:
State-By-State Analysis Of Estate Tax Repeal and Medicare Prescription Drug Benefit

White House Domestic Policy Council
July 27, 2000

Full Report as PDF File

OVERVIEW:

CLEAR DIFFERENCE IN PRIORITIES. In the remaining days of this Congress, Americans are faced with a clear choice:

Republican leadership priority: Large, irresponsible tax cuts. The tax cuts passed by the 106th Congress, in this year and last, would drain more than $1.8 trillion over 10 years from the surplus. This could erase the entire on-budget surplus, based on Congressional Budget Office's projections, or plunge the nation back into on-budget deficit, according to the Administration's more conservative estimates. Either way, this approach leaves no money for key priorities like a Medicare prescription drug benefit.

Moreover, it is weighted towards the wealthy, with the top 1 percent of Americans benefiting as much as the bottom 80 percent combined. As a result, despite their large cost, these tax cuts provide little for middle-class families.

Clinton-Gore and Democrats' priority: Investments in Medicare and targeted tax cuts for working families. Democrats are committed to a responsible budget that protects Social Security and Medicare, takes Medicare Part A off-budget and extends the Trust Fund to 2030; pays off the national debt by 2012; and makes critical investments in:

Voluntary, affordable Medicare prescription drug benefit. As prescription drug prices rise and coverage drops, investing in a new, optional benefit is essential to help prepare Medicare for the health care challenges of the 21^st century. It is also important to make Medicare more efficient and competitive, ensure that provider payments are adequate to ensure quality, and decrease the uninsured to decrease uncompensated care.

Targeted tax policies including fiscally responsible marriage penalty relief. The Clinton-Gore Administration and Democrats support targeted tax policies including responsible marriage penalty relief as well as tax relief for retirement savings, long-term care, education, child care, school construction, working families with three or more children, workers with disabilities, and health insurance coverage. Nearly two-thirds of the benefits go to middle-class Americans, compared to about one-fourth under the proposals passed by the Republican-led Ways and Means Committee.

Republican estate tax repeal alone costs as much as the President's entire prescription drug plan when phased-in but helps millions fewer Americans.

Only the wealthiest 2 percent of families benefit from the repeal of the estate tax. In 25 states, there are fewer than 500 estates that would benefit. Yet, when fully phased-in by 2010, the average benefit per estate will be $800,000 ($390,000 for fewer than 43,000 estates in 1997, the data used in this report). Half of the benefits of estate tax repeal go to the top one-tenth of 1 percent of the eligible population.

All 39 million Medicare beneficiaries would have the option of Medicare prescription drug coverage under the Democrats' plan. In 10 states, the number of Medicare beneficiaries exceeds 1 million. This will help seniors whose average income nationally is about $20,000 and is, in some states, as low as $15,000.

IMPORTANCE OF A MEDICARE DRUG BENEFIT AND MEDICARE REFORMS

Access to prescription drugs for the elderly and people with disabilities is limited. Only 3 in 5 Medicare beneficiaries have dependable, affordable prescription drug coverage.

16 states have 20 percent or fewer firms offering health insurance to retirees. Nationally, 22 percent of firms offer health insurance to retirees older than age 65. No state has more than 30 percent of firms offering this coverage. Trends suggest that this coverage will continue to decline, so that very few seniors will get their prescription drug coverage through their former employers in the future.

Private Medigap premiums are expensive – especially for older seniors. On average, it costs about $164 per month for a 65-year old to buy a Medigap plan that pays for prescription drugs and lower cost sharing (seniors cannot buy insurance for prescription drugs alone). Monthly premiums range from $107 to $249. These high and variable premiums help explain why only about 10 percent of beneficiaries get prescription drugs through Medigap – and why almost half of these Medigap enrollees do not keep it for the entire year.

Access to Medicare managed care will decline in 2001. Because some managed care plans have decided not to participate in Medicare, nearly 1 million beneficiaries will have reduced -- or no –access to managed care which usually covers prescriptions.

This is why the House Republican plan -- that relies on private insurers to voluntarily offer prescription drug coverage -- will not work. In fact, in one state that tried this approach, no qualified insurer participated, validating the insurance industry's assertion that a private insurance model will not work.

Long-overdue, voluntary Medicare prescription drug benefit. The Clinton-Gore Administration and Congressional Democrats have proposed a voluntary, affordable Medicare prescription drug benefit for all beneficiaries. It would provide prescription drug coverage that would have a zero deductible and cover half of all prescription drug costs up to $5,000 when fully phased-in. It will also limit all out-of-pocket medication costs to $4,000. This optional benefit would also provide negotiated discounts that would ensure that Medicare beneficiaries no longer pay the highest prices in the marketplace. It would be part of a broader plan to strengthen and modernize Medicare.

Clinton-Gore and Democrats propose investing tens of billions of dollars in needed payment increases to health care providers. Adequate Medicare and Medicaid payments are vital to the nation's health care providers, including:

5,294 hospitals (including 1,379 rural hospitals and 1,124 teaching hospitals)

7,426 home health agencies, and

14,829 nursing homes.

These Medicare and Medicaid payment increases are complemented by major new investments in health insurance coverage for children, parents, people 55 to 65 years old, workers in between jobs, and legal immigrants. Increasing coverage decreases uncompensated care for health care providers, especially for safety net providers.

Privacy Statement