Medicare politics has sunk to a very low place this spring, imperiling provider payments, a prescription-drug program for seniors and maybe even the future solvency of the program. We've witnessed Democrats waging Medicare war with Republicans, providers pitted against one another for funds and seniors trying to hold provider increases hostage to win a drug benefit.
In the 2000 elections Republicans and Democrats tried to one-up each other over who was going to deliver a prescription-drug program first. The issue took on the aura of inevitability last year. Now, Republicans have thrown in the towel on passing a bill by Memorial Day, a self-imposed deadline.
Here's one opinion: That isn't such a bad thing under current circumstances.
Let me hasten to say that there is no question that a prescription-drug benefit for Medicare is needed. A recent report found that 40% of beneficiaries had no insurance coverage for drugs in 1999. HMOs are abandoning Medicare+Choice plans and employers are lowering or eliminating their drug benefits for retirees right and left. With more and more medical answers to illness coming in the form of drug therapies administered outside the hospital, the lack of a drug benefit under traditional Medicare is a national disgrace.
But here's the rub. Medicare needs a long-term fix. Adding a hugely expensive benefit to a program that already is facing a demographic and financial battle would be fiscally and politically insane, maybe even worse than a $1.3 trillion tax cut coming in the midst of an economic downturn.
Independent scholars have said there are some hard choices coming on Medicare, choices nobody in a position of power seems willing to make. Here's the problem: Part A, the federal nest egg primarily used for Medicare inpatient expenses, will be solvent until 2030, according to the latest report from Medicare's trustees. Last year alone, the fund, which is generated mainly from payroll taxes, had a surplus of $31 billion. That looks great, until you realize that beginning in 2016, outlays from the fund will exceed revenue from payroll taxes. That's when the bulk of the baby boomers will have started drawing down the account. By 2030, the number of people 65 years of age or older will have leaped to one in five Americans from one in eight today. Studies have found that to balance the fund over the next 75 years, outlays would have to be reduced by 38%, income increased by 60%, or some combination of the two.
Continuing full benefits for everyone over 65 isn't likely unless young people want to devote a huge chunk of their salaries to pay for the care of their elders, which isn't likely. More and more people are talking about "means-testing" the program, i.e., factoring a beneficiary's income into either eligibility for the program or premium levels and deductibles. This is also known in Washington as political suicide, because seniors are the most likely people to vote and are likely to cast votes solely on the Medicare issue.
Other choices include limiting overall benefits for everyone or extending the eligibility age for the program. None are easy, but neither should be endangering the safety net by cutting provider payments-as the House GOP bill would-or borrowing from the Part A trust fund, as the American Association of Retired Persons wants to do.
President Bush is still pushing for a drug bill this year, realizing that Democrats still hold a solid advantage on the issue, but his plan is far smaller than even House Republicans are offering. Senate Democrats envision spending $450 billion from 2004 to 2010 for a drug benefit and provider payment increases.
Just as so many asked where the funds are going to come from to pay for the Bush tax cut, I would like to know who is going to pay for the cost of a drug benefit or repay the trust fund. I guess that will be some other generation's problem.