For years, it has been the question politicians have taken the greatest pains to avoid: Who will foot the bill for elderly health care and income support in the 21st century, when one in five Americans will be over the age of 65?
Suddenly and without warning, a powerful group of senators has forced the issue into the open. By voting this week to make the affluent elderly pay a lot more out of their own pockets and to force those currently 37 or younger to wait until they are 67 to get Medicare, the Senate Finance Committee has launched the debate long before most members of the Washington political establishment were prepared for it.
President Clinton and GOP leaders had hoped to finesse the question by appointing a commission that would report in 1999.
But the actions of the Finance Committee, whether or not its proposals become law, will crystallize arguments that could put different generations in fierce economic and social conflict.
The proposal was a remarkable departure from conventional politics--both in the idea itself and for the strong, almost unanimous, support it received from committee members of both parties.
The panel’s action has raised issues “that have not been on the table before,” said Robert B. Friedland, director of the National Academy on Aging.
Medicare and Social Security today consume about seven cents of every dollar of goods and services produced in the mammoth U.S. economy. At current growth rates, the outlays will reach a staggering 13% of the nation’s economic output by 2025.
By that time, millions of baby boomers--members of the generation born between 1946 and 1964--will be enjoying their retirement and collecting Social Security benefits while Medicare finances their new hips and hearts.
Will Generation X and other workers, the children and grandchildren of the boomers, be willing and able to pay the enormous tab?
Members of the Finance Committee don’t think so--at least when it comes to health care. They want the elderly, particularly the affluent elderly, to bear more of the burden of health care so the next generation of taxpayers will pay less.
Finance Committee members “are making a statement here--they want to bring beneficiaries to the table to help solve future problems,” said Marina L. Weiss, vice president for public policy at the March of Dimes and a former staff director of the Finance Committee.
The committee’s proposal would require single recipients with incomes of at least $50,000, and couples with incomes of $75,000 or more, to pay the first $540 a year of their doctor bills before Medicare kicks in and pays 80% of approved charges. This represents a big increase from the current deductible of $100 a year paid by all 38 million Medicare beneficiaries, regardless of income.
The annual deductible would rise with income, reaching a hefty $2,160 a year when an individual makes $100,000 a year or a couple has $125,000 in income.
The key here is the principle, not the money. Fewer than 4% of Medicare enrollees have incomes over $50,000, and the proposed deductibles would raise less than $7 billion over five years. This is negligible compared with the $115 billion in Medicare savings over five years that is proposed in the balanced-budget deal between Clinton and GOP leaders.
But the change would be dramatic: Medicare, a social insurance program that protects the rich and poor alike, would begin distributing its financial bounty on the basis of income.
That approach is anathema to the senior citizens lobby, the labor movement and traditional liberal Democrats, who view it as a threat to convert the program into a welfare system.
And Clinton would enrage the entire Democratic establishment if he goes along with the plan. “This is going to be a tough one for the president,” Weiss said.
Yet the Finance Committee will have achieved its goal even if its plan never becomes law; it will have touched off a debate on the premise that Medicare is a sweet, but perhaps unsustainable, program threatened by a combination of increased longevity, the boomer bulge and expensive advances in medical technology.
A couple who turned 65 in 1980, for example, could expect Medicare to spend $114,000 on them during their lifetime, according to calculations by Eugene Steuerle of the Urban Institute. But for a couple that turned 65 in 1995, the total lifetime estimate climbs to $232,000.
In 2020, when today’s 42-year-olds become eligible, the lifetime promise of Medicare will be worth $428,000.
Medicare financial reform is tough because it is a “zero-sum game,” where somebody has to lose, said Brian Biles, a health care expert and vice president of the Commonwealth Fund.
Taxes can be raised, but that is politically unacceptable now, Biles noted. One way to control program costs is to trim payments to providers--doctors, hospitals and health maintenance organizations--and that is the standard approach Congress has adopted in recent years. Or, beneficiaries can be forced to pay more. Yet politicians are reluctant to make beneficiaries, who are also voters, pay more.
Medicare now spends $200 billion a year, about 12% of the federal budget. Payments are climbing at an unsustainable pace of 7.2% a year per person, far faster than the general growth of the national economy. Average Medicare spending of $5,541 per enrollee this year will climb to $7,851 in five years.
Slowing the growth “while ensuring beneficiaries’ continued access to high-quality care is one of the greatest challenges facing policymakers today,” the Urban Institute said in its newly issued report on Medicare.
The Finance Committee, by venturing onto dangerous political ground, has thrown the challenge into the arena for Americans to argue about.