Medicare Reform: Guaranteeing Coverage

Medicare is in trouble

“Medicare as we know it” is unsustainable; few would argue this point. Official scorekeepers for both the Congressional budget and Medicare agree that the program, as it is currently structured, is on the path to bankruptcy.  The independent, non-partisan Congressional Budget Office (CBO) projects the program will face insolvency by 2020–just 9 years from now–unless action is taken. The Trustees for Medicare (those who run the program), echo these concerns: “Without corrective legislation…the assets of the [Medicare] trust fund would be exhausted within the next 7 to 19 years.”

Even President Obama acknowledges this fact, “Our deficit will continue to grow because Medicare [is] on an unsustainable path. Medicare is slated to go into the red in about eight to 10 years.  I don’t know if people are aware of that. If I was a senior citizen, the thing I’d be worried about right now is Medicare starts running out of money because we haven’t done anything to make sure we’re getting a good bang for our buck when it comes to health care.”

Experts identify three main causes of this reality: 1) demographic changes, 2) the rising cost of health care, particularly in relation to Medicare, and 3) the President’s recently-passed health care overhaul.

First, baby boomers are retiring at a rate of 10,000 a day and will continue to do so for the next 19 years. This means fewer workers paying into the system and more retirees claiming benefits. People are also living longer than they were when the program was originally structured. Average American men and women used to live to their 60’s or 70’s, today they’re living into their 70’s and 80’s. Significant restructuring is clearly needed to account for the changing configuration of seniors covered by the program.

Second, health care inflation has consistently outpaced normal inflation over the years. And, Medicare has been no exception, greatly exceeding growth projections made when the program began.  At its inception in 1966, Medicare cost about $3 billion a year and the House Ways and Means Committee projected that in 1990 it would cost about $12 billion (a figure that counted for inflation). The actual 1990 price tag? $107 billion! The out-of-control growth rate has continued unabashed, consuming roughly 13% of the federal budget in 2010.

Third, even before President Obama’s health care overhaul passed last year, Medicare faced serious budgetary and demographic problems. Unfortunately, last year’s health care law made things worse. The law cut over $500 billion from Medicare, not to extend the program’s solvency, but rather to expand the struggling Medicaid program and provide hundreds of billions in subsidies for individuals to join government-run health exchanges.

Meanwhile, the law’s only serious idea for controlling Medicare costs was to empower the President to appoint 15 unelected, unaccountable bureaucrats to the Independent Payment Advisory Board (IPAB) to cut payments to doctors and hospitals. While this might “reduce unnecessary spending” to use President Obama’s words, many observers believe these one-size-fits-all, across-the-board cuts could lead to providers refusing to treat seniors.

Inaction is fatal

Given the widespread agreement among both political parties that Medicare is in serious trouble, it is startling to consider the lack of (specific) plans offered to preserve and strengthen the program. In fact, there really exists only one plan (from Cong. Paul Ryan) that has laid out such details. Instead of meeting Congressman Ryan’s plan with a counter-plan or constructive criticism on how it could be tweaked to achieve the goal of serious Medicare reform, its opponents have demagogued it as a heartless plan that seeks to effectively “throw grandma off the cliff” as one recent Democrat-backed ad pictured.

In a May 2011 appearance at the Peterson Foundation, President Clinton expressed concern over his party’s partisan tactics when it comes to discussing Medicare reform, “I think the Democrats are going to have to be willing to give up, maybe, some short-term political gain by whipping up fears on some of these things — if it’s a reasonable Social Security proposal, a reasonable Medicare proposal. We’ve got to deal with these things. You cannot have health care devour the economy.”

Most Americans would agree with the former president and feel similar to Senator Rubio, who thinks Medicare is anything but a political talking point. Rubio’s experience is a personal one – his parents worked hard all their life and relied very heavily on the program when they got older. Medicare took care of them and now Senator Rubio wants to make sure Washington fixes the program so it is there for seniors today and tomorrow.

Yet if we all admit that Medicare is going bankrupt and we all want to avoid that fate, why is Congressman Ryan the only one who has put forth a plan? As Senator Rubio says in a recent web video, “anyone who is in favor of doing nothing…is in favor of bankrupting it…No one likes this news, but it is the undeniable truth. And the sooner we begin to deal with it, the better off we all are going to be.”

Senator Rubio’s challenge is one for each of us to consider. If opponents of the Ryan plan don’t like it, that’s fine, but please come forward with ideas (and details) that we can discuss and analyze. If we’re going to make sure Medicare is around for decades to come, this conversation cannot wait any longer.

The Ryan Budget: Only Plan on the Table That

A. Protects Seniors Today…

For politicians and policy analysts alike, Medicare is a complex subject. They must consider budget implications, coordinated care, provider shortages, and the whole gambit of other issues that come with government-run health care and a large entitlement program.

For seniors, it’s much simpler – what’s covered and how much do I need to pay? Particularly for seniors who are either on Medicare or approaching it in the next ten years (you’re 55 or older), the big takeaway from Ryan’s plan is that you are covered and nothing will change. That’s right – contrary to many of the rumors, current seniors and those individuals who are 55 or older WILL NOT BE AFFECTED.  If you’d like to read his plan yourself, click here.

Needless to say, this is far better than what current law has in store for seniors, particularly present-day and approaching seniors.  As mentioned earlier, the President’s health care law has empowered a 15 member board of unelected, unaccountable bureaucrats – IPAB – to start cutting Medicare costs (by lowering doctor and hospital payments) as early as 2015. This will affect seniors’ (of ALL ages) and mean access to treatment and providers will be limited for those older folks most in need of care – and coincidentally those who have been relying on the program the longest. This is not right and it’s not the path down which the majority of Americans believe we should head.

B. While Reforming Program for Tomorrow

Americans who will become eligible for Medicare in 2022 (those under 55 years old today), would still be covered by Medicare. In fact, they would see many similarities with the program as it exists today. First, they would have guaranteed coverage, contrary to outrageous claims made by opponents of the plan, like Missouri Senator Claire McCaskill, that “It would [leave] seniors to fend for themselves in the private market against insurance companies.”

Unlike today’s program however, seniors would pick the insurance plan that works best for them. These options – again, all plans offering guaranteed coverage regardless of pre-existing conditions – would give beneficiaries the ability to choose from competing plans similar to the kinds of plans enjoyed by members of Congress.

The biggest difference is the program would be financially stable and secure. This won’t be achieved through a bureaucratic board like IPAB deciding what care you should have or when you will be able to receive it, but instead through one of the strongest cost controls ever devised: competition.

Finally, individuals under 54 years old today will have to pay more than current recipients pay for Medicare coverage, no one is pretending otherwise. But, it’s also no secret, without any changes, these individuals face the possibility that Medicare won’t be there for them when they need it most. The program has been running deficits since 2008 and if no action is taken, any projected cost increase facing seniors under the Ryan plan will be a bright alternative to the benefit cuts, denied access to care, and premium increases currently lying in wait.

These are tough decisions, but right now, the challenges facing Medicare are not insurmountable.  Unfortunately, the longer we wait, the worse off Medicare will be and the harder the choices are going to become.  Americans want to hear ideas and answers, not attacks on those willing to put forth solutions.  We deserve, and should demand, an open, frank discussion about Medicare.

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