Fraud isn't biggest challenge to preserving Medicare
Leave it to our leaders in Washington to spend a dollar to save a dime. Congress just announced that a $77-million computer system put in place last summer to combat Medicare fraud had saved taxpayers a grand total of $7,591 through the end of the year.
With returns like that, the computer system would pay for itself in a few thousand years. The feds might need to write this investment off as a loss.
Of course, officials must do everything they can to fight Medicare fraud. But fraud isn't the program's biggest challenge – America's aging population is. With the Baby Boomers approaching retirement and health care costs spiraling upward, Medicare's fiscal path is unsustainable – even if malfeasance in the program were eliminated.
Congress must respond by reserving Medicare for truly needy seniors and introducing market competition to pay for their care.
Combating Medicare fraud is the rare policy proposal that both political parties can get behind. By some estimates, fraud in the program costs taxpayers $60 billion a year.
Despite bipartisan interest in battling fraud, congressional efforts to battle fraud simply haven't worked. Worse, the fixation on fraud has distracted lawmakers from taking on the more difficult structural problems that threaten Medicare's solvency.
By 2022, Medicare spending is projected to reach $1 trillion. The program will likely become insolvent by 2024 – five years earlier than the Medicare Trustees predicted in 2010.
Obamacare claims to attack this problem head on. The health law purports to rein in costs by slashing Medicare payments to providers by about $575 billion.
But instead of using that money to shore up Medicare's finances, Obamacare is set to expand Medicaid enrollment and subsidize insurance for low- and middle-income Americans.
And those planned cuts in Medicare may not ever come to pass. Congress has routinely postponed cuts in reimbursement rates for providers that treat Medicare patients. Even the Congressional Budget Office is skeptical, saying in its 2011 Long-Term Budget Outlook that it "assumes that several policies designed to restrain federal spending on health care will not be continued."
Phantom cuts won't save Medicare – and neither will anti-fraud initiatives that don't prevent fraud. Instead, Medicare needs a fundamental overhaul.
The first step? Reserving Medicare for only those who need it.
President Obama is fond of pointing out that Warren Buffett pays a lower tax rate than his secretary. But the president doesn't mention Buffett also receives the same government health benefits as his secretary – benefits that he certainly could afford to pay for himself.
Some 10 percent of Medicare beneficiaries make north of $60,000 a year, and 6 percent pull in more than $80,000 annually. It makes little sense for average taxpayers to pay for the care of seniors with incomes greater than the national median. These comparatively wealthy individuals should pay for more of their care – particularly when Medicare is facing imminent bankruptcy.
But means-testing will only partially solve Medicare's fiscal problems. Federal officials must also rein in Medicare's costs. But rather than doing so through centrally planned fiat, our leaders should leverage the power of competition to empower patients to spend Medicare dollars efficiently and effectively. And the way to do so is through vouchers.
Armed with vouchers, low-income seniors will have the freedom to shop around for the coverage that meets their particular needs. Both insurers and providers will be forced to compete for seniors' business – and will thus have to work to provide the best possible care at the lowest price.
Some lawmakers are already trying to move Medicare in this market-friendly direction. Rep. Paul Ryan (R-WI) and Sen. Ron Wyden (D-OR) have put forth a bipartisan plan that offers seniors premium support – a fixed payment with which they can purchase their own insurance. The Medicare reform proposal offered up by Sens. Richard Burr (R-NC) and Tom Coburn (R-OK) incorporates both premium support and means-testing.
To avert the coming Medicare crisis, Congress and the White House must address the program's structural problems head on. Four-figure fraud savings won't cut it.
Sally C. Pipes is president, CEO, and Taube Fellow in Health Care Studies at the Pacific Research Institute. Her latest book is The Pipes Plan: The Top Ten Ways to Dismantle and Replace Obamacare (Regnery 2012).