PERSPECTIVES ON MEDICARE : Retire the Insolvency Myth : Expanded benefits and restrained spending are possible, but only if politics are tabled.

Furor rather than fanfare marks Medicare’s 30th birthday, the end-of-July anniversary of President Lyndon Johnson’s signing the program into law. Three streams of American politics--the battle over budget deficits, the control of Medicare’s costs and maneuvering for the next presidential race--have come into dramatic partisan conflict. And with that has come a confusing debate about the program’s problems and future.

Republicans say that Medicare’s budget must be slashed to “save” an endangered program. Repeatedly citing the 1995 report of the Medicare trustees, House Speaker Newt Gingrich claims that the program will run out of money unless its forecasted expenditures are reduced by $270 billion by the year 2002. Senator Majority Leader Bob Dole has suggested a bipartisan national commission to remedy Medicare’s troubles. President Clinton has, with comparable partisan rhetoric, publicly and repeatedly rejected these Republican positions, portraying them as fundamental assaults on a treasured public program.

This dialogue has so far been unilluminating. The President finds himself aggressively on the defensive, criticizing Medicare’s “attackers” more than clarifying his own reform position. The Republicans find themselves caught among fundamentally conflicting promises: to enact tax cuts, to balance the budget and to “protect” Medicare. And the country finds itself in the midst of a bewildering mix of crisis talk and ideological name-calling. This is so, in large part, because we have a political class and a press corps that thrive on conflict and have little interest in asking the questions that would directly address the serious but manageable problems Medicare undeniably faces.

Two misleading claims in the current debate require critical attention before any sensible discussion of Medicare reforms can occur. One is the mistaken view that because Medicare faces financial strain, the program requires radical transformation. The experience of the 1980s and early 1990s shows that Medicare administrators can moderate the pace of increase in the program’s cost. For much of that period Medicare expenditures rose less rapidly than the costs of medical care in the private sector.

Second, Republican critics (and some Democrats) continue to use the fearful language of insolvency to describe Medicare’s future, in which the program’s trust fund will be literally “out of money.” This language represents the triumph of misleading metaphor over careful thought. This “trust fund” is an accounting term of art, a convention for describing ear-marked revenues and spending now and in the future. If it chooses, Congress can change the taxes that finance Medicare and the benefits it offers. Relating the fiscal consequences to something called a “trust fund” changes nothing in the real economy. Thinking so is the cause of much muddle, unwarranted fearfulness and misdirected energy.

To call the crisis-ridden debate about Medicare’s finances misleading does not mean the program is free of problems. But it is important to understand that Medicare can be adjusted in ways that fully preserve the national commitment to health insurance for America’s elderly and disabled.

What should be done? One place to start is to reduce the gap between the benefits Medicare offers and the needs of its aged beneficiaries. What Medicare covers should be broadened to include the burdensome costs of chronic illness; that means incorporating prescription drugs and long-term care into the program, which is precisely what the Clinton Administration hoped to do in connection with its ill-fated health insurance overhaul.

Widening the benefit package does not mean that total expenditures must rise proportionately. Medical expenditures represent both the type and volume of services given and their prices. Other nations have universal insurance and broader benefits, but spend less per elderly citizen than we do. They are able to do this because they pay their medical professionals less, spend less on administration and use expensive technology less often.

Medicare’s spending should be restrained below the projected growth rate of 10% a year. There is no good reason that the program’s outlays need to rise at twice the rate of general inflation--or more.

As for beneficiaries, it is time to reconsider the idea of charging wealthier citizens more for Medicare’s physician insurance program--itself a hastily arranged benefit in 1965 that was supposed to draw its financing equally from general revenues and premium payments by beneficiaries. Over time, general revenues came to account for 80% of the program’s financing.

We need debate about how Medicare should be reformed. What we do not need is debate that scares the country about its future by disseminating false claims about Medicare’s unaffordability. It would indeed be a crisis if the legitimate health costs of our aged and disabled were unaffordable.