Medicare’s Ailment Demands Remedies at Basic Levels

After Medicare’s trustees projected Wednesday that the $200-billion-a-year program for the elderly and disabled would go broke in 2001, Democrats and Republicans began firing off political fusillades against one other, all in an effort to position themselves as the leaders best able to protect you, your parents or grandparents.

Medicare’s current $129-billion surplus and the continuing flow of tax revenues ensure that benefits will remain steady for at least five years. Admittedly, that’s not much comfort, but Washington’s Medi-Scaring has gone increasingly overboard since the Republicans rightly attempted last year to slow the rate of growth in Medicare spending from the current 10% annually to 7.5%. The GOP aim was to guarantee solvency for at least a decade by cutting $168 billion in new spending. President Clinton vetoed the legislation, denouncing it as a ploy to reduce health care for retirees in order to raise money for tax cuts for the rich. The president later came up with a kinder-and-gentler trim of $128 billion that also promised 10 years of solvency. Clinton did this largely by shifting most home health care costs from one Medicare trust fund, “Part A,” which covers hospital care, to another fund, “Part B,” which covers services like visits to private doctors.

His solution is politically savvy, for it seems to raise benefits without imposing new copayments or taxes, and Republicans are cynical for damning it after proposing a similar bill in the House last year. Still, there are reasons why the Clinton plan is legislatively disappointing. Simply moving costs in the program to Part B will do little or nothing to control the rapidly spiraling costs of home health care; it will not, for instance, require home health care beneficiaries to pay the 20% copayment or 25% premium extracted for other Part B services.

Bipartisan bickering over this shell game is largely beside the point, for even if the administration and Congress could agree on reductions in the range of $120 billion to $150 billion, this would preserve the Medicare trust fund only until between 2006 and 2010, studies say.

The key, then, is looking at more fundamental short- and long-term solutions. And fortunately, while the scare tactics dominate the news reports, many in congressional hallways admitted this week that there is actually bipartisan agreement on how to cut costs significantly: for example, strengthening controls on fraud and abuse, raising copayments for recipients and reducing payments to health care providers. These solutions need to be set in legislation before they sink in political mud.

Finally, Congress needs to begin thinking about a far greater challenge: paying for the 76 million baby boomers, the first of whom will begin drawing benefits in 2010 (only 36 million people do so today). To maintain the current level of benefits for baby boomers, the payroll tax rate would have to rise to an onerous 12% each for workers and employers, according to one study. And that study didn’t even consider the increased costs of advancing medical technologies.

Baby boomers might live longer than their parents, but whether they’ll have the medical coverage to support good health in those additional years remains uncertain.