Trump’s free $200 prescription card is ‘a bad idea from A-Z’: Former Bush official

Medicare’s main trust fund, the Hospital Insurance (HI) fund – also known as Part A of Medicare – was already in financial trouble before the pandemic hit.

Now the ongoing recession is squeezing the program from both ends. And a recent Trump administration plan to send $200 Medicare cards to seniors has made the program’s financial picture even murkier.

A recent projection from James Capretta, a senior advisor at the Bipartisan Policy Center and a resident scholar at the American Enterprise Institute, found that the program could run low on funds by 2023.

In other words, the next president – be it Joe Biden or President Trump in a second term – will “have about two years to figure out what to do,” Capretta said in an interview with Yahoo Finance.

Capretta studies health care, entitlement programs, and budget policy, and also served as an associate director at the White House’s Office of Management and Budget during the George W. Bush administration.

A ‘broader societal problem’

The 2020 Medicare Trustees report notes that “[i]n the year of asset depletion, which is projected to be 2026 in this report, HI [Medicare Part A] revenues are projected to cover 90% of incurred program costs.”

THE VILLAGES, FLORIDA - OCTOBER 03: U.S. President Donald Trump speaks during an event at the Sharon L. Morse Performing Arts Center in The Villages on October 03, 2019 in The Villages, Florida. President Trump spoke about Medicare, and signed an executive order calling for further privatizing of it. (Photo by Joe Raedle/Getty Images)
President Trump spoke about Medicare, and signed an executive order calling for further privatizing of it, during an event at the The Villages in Florida in October. (Joe Raedle/Getty Images)

According to the report, about one of every six people in the U.S. receive coverage through the program. That’s 61 million Americans, including 52.6 million people age 65 and older and 8.7 million people with disabilities.

The HI trust fund had receipts of $322.5 billion and a balance of $194.6 billion at the end of 2019.

Capretta said "the trustees released that report without any idea that the pandemic was about to hit.” The new strains are "a recipe for a lot of trouble,” he added.

A recent report from The Commonwealth Fund underscores Medicare’s financial challenges. The report notes that now older Americans – as they lose their jobs and accompanying employer health benefits – are flocking to the program and further straining its finances.

Medicare is currently an important safety net for many older Americans, but it remains crucial to encourage the continued employment of older workers past age 65 to minimize the “long-term effects on Medicare spending and people’s financial security for the remainder of their years,” the Commonwealth report said.

According to the Congressional Budget Office’s 2019 long-term projections, Medicare spending is expected to rise more rapidly than GDP because of several factors, including the aging of the population and rapidly growing health care costs. “Much of the spending growth for Social Security and Medicare results from the aging of the population. As baby boomers age and as life expectancy continues to increase, the percentage of the population age 65 or older will grow significantly, boosting the number of beneficiaries of those programs,” the CBO wrote last year.

Congressional Budget Office, 2019 Long-Term Budget Outlook
Congressional Budget Office, 2019 Long-Term Budget Outlook

Capretta — who appeared as part of Yahoo Finance’s ongoing partnership with the Funding our Future campaign, a group of organizations advocating for increased retirement security for Americans — adds that the cost side of Medicare’s problems are perhaps the most important but also the most intractable.

“It's a reflection of really a broader societal problem,” he said. “We don't have enough discipline on medical care costs...something's going to have to give.”

‘A bad idea from A to Z’

To add to Medicare’s financial strain, the Trump administration has recently sketched out plans to send out free $200 prescription cards to Medicare beneficiaries.

(L-R) Administrator of the Centers for Medicare and Medicaid Services Seema Verma, US Secretary of Veterans Affairs Robert Wilkie, General Joseph Lengyel, Tennessee Governor Bill Lee, FEMA Administrator Peter Gaynor and US Secretary of Health and Human Services Alex Azar watch US President Donald Trump sign a proclamation for Older Americans Month during an event on protecting Americas seniors from the COVID-19 pandemic in the East Room of the White House in Washington, DC on April 30, 2020. (Photo by MANDEL NGAN / AFP) (Photo by MANDEL NGAN/AFP via Getty Images)
President Trump signs a proclamation for Older Americans Month during an event at the White House in April. (MANDEL NGAN/AFP via Getty Images)

“33 million Medicare beneficiaries will soon receive a card in the mail containing $200 that they can use to help pay for prescription drugs,” President Trump announced in September. “Joe Biden won’t be doing this,” he added, making clear the election year politics involved.

The idea will likely cost around nearly $8 billion, and government officials are reportedly scrambling to produce the cards by Election Day and get Trump’s name on them.

"This is a bad idea from A to Z," said Capretta, noting the bad precedent for fiscal responsibility and the Medicare system. “Moreover, it seems not only is it a bad idea, but it seems to be just completely mishandled.”

The Trump administration is reportedly set to send letters to Medicare beneficiaries before the election to alert them that the cards are coming, although most of the cards themselves won’t arrive until after the election.

“I think the whole thing is too contrived to pass the laugh test," Capretta said.

Ben Werschkul is a producer for Yahoo Finance in Washington, DC.

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