Writing Medicare's prescription
The Republican primary in Florida brought discussions of health care, particularly Medicare, back to the forefront of the national discourse. With its sizeable senior population, Medicare and Social Security were top of mind to Florida voters.
It is certainly important that health care, and particularly Medicare, be debated thoroughly during the presidential campaign, as entitlement reform is one of the most pressing issues that Congress and the White House will face next year. Indeed, the latest annual Medicare and Social Security Trustees report projected that the Medicare trust fund will run out in 2024 – five years earlier than previously expected – and the Social Security trust fund will run out by 2036.
The good news is the emerging national consensus, across the ideological spectrum, that we must address the nation's budget problems and that Medicare reform must be a part of any agreement. It's essential, though, that changes to the Medicare program be made responsibly, starting with the principle that reform must protect the elements of the program that are working efficiently now.
One Medicare program that should be kept intact is Part D, the prescription drug benefit program. Part D is the most cost-effective and successful entitlement program the federal government runs. Even Newt Gingrich, presenting himself on the campaign trail as the champion of conservative voters, has spoken up several times in support of Part D. He has touted the market-based program's success and effectiveness in saving lives, saving money and offering people more choices.
Thanks to competition among insurers, the prescription drug program costs the government and beneficiaries far less than initially projected. Last year, the Congressional Budget Office (CBO) reduced its baseline 10-year spending projection for all of Medicare by $186 billion, two-thirds of which is accounted for by a reduction in Part D spending.
While Medicare Part D is an example of a Medicare program that works, it is clear that not all Medicare policies and programs are as useful and valuable.
The Independent Payment Advisory Board (IPAB) that was created with the passage of President Obama's health care law is one such provision that should be eliminated. IPAB would allow a non-elected and unaccountable board to make program cuts to meet spending targets.
Proponents of the board have argued that IPAB would improve the quality of care as a result of the cost-cutting measures it enacts. In fact, IPAB is a threat to critical medical treatments and services for all Medicare beneficiaries. The cuts it imposes will only reinforce systemic problems, not fix them, and create unsustainable savings.
Major changes in the Medicare program should not be decided by bureaucratic fiat in a process lacking transparency and oversight. Rather, they should be debated and decided by elected officials who will be held accountable for their decisions. Everyone knows that tough choices lie ahead. It's up to our political leaders to explain that reforms are essential to make Medicare secure for future generations of seniors.
There are many possible ways to reduce Medicare spending. A broad reform debate will enable people to better understand the tradeoffs involved.
To make sure program benefits remain available for those who need them most, lawmakers should consider eligibility requirements and need-based benefits. By raising the eligibility age for Medicare to 67 from 65, for example, $124 billion would be saved.
The bipartisan Simpson-Bowles commission has proposed gradually limiting the Medicare benefits the wealthy receive. Last fall, President Obama proposed higher Medicare premiums for high-income seniors as part of the deficit reduction plan that he submitted to the Congressional "supercommittee." Obama's plan would save about $20 billion over 10 years in Medicare.
Increasing premiums beneficiaries pay for Medicare doctors' coverage to 35 percent of program costs from the current 25 percent could save $241 billion. Modernizing Medicare's benefit package to include co-payments, deductibles and an out-of-pocket maximum could save about $14 billion through 2018. A cutback in subsidies for "Medigap" supplemental insurance would save $92 billion.
A still-bolder proposal going beyond Medicare itself would be to remove the distortion in the tax code that keeps health insurance tied to employment. The tax write-off for employer-provided health care benefits is the single largest tax expenditure. It is estimated to cost the government more than $1 trillion over the next five years. Capping the tax exclusion in 2018 and then phasing it out over 10 years would result in massive savings that could be devoted to shoring up Medicare and other programs for seniors.
The American people are ready to accept some difficult choices as part of a comprehensive deficit reduction program. It is time for Congress to begin the debate.
Douglas Schoen is a political strategist and author of “Mad as Hell: How the Tea Party Movement is Fundamentally Remaking Our Two-Party System” (Harper 2010), co-authored with Scott Rasmussen.