Trump’s free $200 prescription card is ‘a bad idea from A-Z’: BPC Advisor

Bipartisan Policy Center Advisor James Capretta joins Yahoo Finance’s Zack Guzman to discuss how health care is factoring into the 2020 election, as President Trump plans to send out free $200 prescription cards to Americans on Medicare.

Video Transcript

ZACK GUZMAN: I want to focus in on Medicare and health costs in the US, as we're seeing those tied to the coronavirus pandemic grow by the day. And there are growing concerns that America's Medicare funds will be depleted much faster. According to the latest report from Medicare's trustees, Medicare's hospital insurance trust fund is already slated to deplete reserves by 2026, even without fully factoring in the rising costs tied to the pandemic.

And those funding fears are growing. The Trump administration says it's advancing plans to further drain the Medicare trust fund by another $8 billion to ship notices of free $200 prescription cards to seniors ahead of the election, a plan that some Democratic critics are calling, quote, "a shameless stunt to steal Medicare dollars for a boost at the polls."

So here to discuss the funding problem stacking up for one of the government's largest programs is James Capretta, a Bipartisan Policy Center advisor. And James, good to be chatting with you. Thanks for taking the time to discuss it. And I want to get into those Trump prescription cards in just a second.

But first, I mean, you put out a recent paper looking at the funding issues that are stacking up. And anytime we're talking about insolvency in about five years, it doesn't sound good. So how serious is the problem becoming?

JAMES CAPRETTA: Well, it's quite serious. It was already serious before, as you indicated, the pandemic hit. I mean, the trustees released that report without any idea that the pandemic was about to hit. The numbers were based on the old data. And they said it was going to be drained in 2026.

With the pandemic, and especially, frankly, the job loss and the lower wages-- that's where a lot of the payroll tax revenue comes from for the HI trust fund-- that's been dwindling and going down. So we expect-- we did a projection, and we think it might be as early as 2023. So you're talking a new president gets inaugurated, or the president gets re-elected in 2021. And they have about two years to figure out what to do to prevent insolvency of the HI trust fund.

You add to that they've put a bill-- provisioned an earlier bill that loaned money to hospitals, essentially, out of Medicare. They gave an advance on future Medicare payments and said, we'll collect it back later. Well, now they're saying, we may not collect it back because the hospitals are saying, we don't want to pay it back. And of course, if they allow that to happen then the trust fund will go bankrupt even faster.

And then you add to that the potential for an uptick in use of care because people postpone care, and now we're going to go back and get it. You know, you could end-- it's a recipe for a lot of trouble for Medicare.

ZACK GUZMAN: Yeah, and the costs, too-- I mean, you guys highlighted this. The general funds transferred to the supplementary Medicare insurance trust fund is growing in terms of the costs or the share of individual and corporate income tax collections. It was 5.4% in 2000. Last year, that figure was growing and hit 16.4%.

So it's a large uptick there. And the trustees, as you talked about in that report, projected it would be 26% of income tax revenue by 2040, if we were to get there. But if that is the fact and you're talking about tax revenues falling here, I mean, how do you solve it? It's a very difficult question, but how do you solve it if costs continue to rise at the rate we're seeing?

JAMES CAPRETTA: Well, that's the thing. They can't, you know? So there has to be a much greater effort nationwide to bring more discipline to the cost side of medical delivery. And that has to happen across the board, in Medicare, in job-based insurance and Medicaid, the whole business.

So, you know, Medicare isn't alone in this problem. But it does affect our tax payments and how much we can afford financially at the federal level. That's why it's so prominent as an issue.

But it's a reflection of really a broader societal problem, which is, we don't have enough discipline on medical care costs. And that affects Medicare in a big way. If we don't get a handle on costs, yeah, we've got real problems in terms of how we're going to pay for all this. So something's going to have to give.

ZACK GUZMAN: And that, to me, makes this next question all the more interesting when we think about the timeline here of that. If you have costs rising, it's an interesting time for the Trump administration to be pushing through a program here that would cost and drain that trust fund by another $8 billion here.

And we're learning more about that because Medical and Medicaid Services administrator Seema Verma, and we've seen White House Chief of Staff Mark Meadows here, moving forward with these plans to send out letters to 39 million Medicare beneficiaries by next week, if all goes well in their plans, informing people of free $200 prescription cards coming their way.

They might not be able to get that before the election, but certainly, it seems like it would be tied to the election. Democrats aren't necessarily pleased with that idea. But what would you say to the idea of, I guess, draining the fund by another $8 billion at a time like this?

JAMES CAPRETTA: This is a bad idea from A to Z. I mean, everything about this is unwise. It basically sets a terrible precedent. Because when the other party is in charge, they can try to do something similar, right?

And moreover, it seems not only is it a bad idea, but it seems to be just completely mishandled. If you're going to do something like this to try to curry favor with senior citizens just before the election, you'd want to get them the card before the election, the actual money, right?

But they didn't get it going fast enough. So now they're going to make them a letter telling them they're going to get a card, but maybe not until after the election. So I think the whole thing is too contrived to pass the laugh test.

It's kind of concerning that we could have an executive branch that could take $8 billion out of Medicare for something like this, and then pretend they're going to pay for it somehow with a regulation that doesn't exist yet down the road. So I really-- there's a lot of concerning aspects of this. I wish they weren't doing it. I think it'll backfire.

ZACK GUZMAN: Yeah, that's a very good point. I mean, Politico brought this report out. A lot of people were questioning if they were going to go through with it. It does seem like they are trying to push this through, though.

And the report does claim that the cards, the $200 prescription cards, could even have branded references to Trump himself. So you can make of that what you will when it comes to tying this to the election, but a very interesting point-- note to highlight there in terms of not getting it done.

But yeah, I've gotten a lot of letters before saying that money is coming my way. You never really believe it [INAUDIBLE]. But appreciate the time, James. James Capretta, Bipartisan Policy Center advisor, thanks again for chatting that with us.

JAMES CAPRETTA: You're welcome. Thank you.