A QUESTION OF
State-By-State Analysis Of Estate Tax Repeal and Medicare
Prescription Drug Benefit
White House Domestic Policy Council
Full Report as PDF File
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
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 21st 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.
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
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.
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
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.
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