Baucus questions need for Medicare overhaul

Slowing healthcare inflation may have removed the need to overhaul either Medicare or Medicaid as part of a grand-deficit reduction deal, according to the senior Senate Democrat overseeing federal entitlement programs.

Sen. Max Baucus (D-Mont.), chairman of the Finance Committee, challenged the long-held assumption on Capitol Hill that any agreement to rein in the $16 trillion historic federal debt must include the two federal healthcare programs because they comprise more than 25% of all federal spending.

Baucus, who has repeatedly advocated including the programs in any overhaul in the past, said he now thinks it may be no longer necessary since the rate of healthcare spending growth over the next 10 years is expected to slow and match the economy's growth rate, according to the Congressional Budget Office. Also, even after the next 10 years when Medicare spending is projected to grow 1.6% faster than the economy that is still slower than the 2.5% faster growth in health spending seen in recent decades.

“Healthcare costs on their own are starting to rise a little less quickly than they were earlier,” Baucus said Tuesday during a hearing on the Rivlin-Domenici deficit reduction proposal, which includes a Medicare and Medicaid overhaul. “If these CBO numbers are accurate and the current trend continues—trends never do, but if it does—that would seem to indicate that there is not quite the urgency to address entitlements with quite the same aggressive attack mode as you have indicated in your report.”

Alice Rivlin, one of the co-authors of the report and a former director of the Office of Management and Budget for President Bill Clinton, agreed the CBO projections were “encouraging,” but maintained that a Medicare overhaul was still needed. “We still believe that it would be a sensible thing to do to offer seniors a choice on an exchange where the private sector would also be competing by virtue of some of the same changes to offer a better product at a lower cost.”

The deficit-reduction plan co-authored by Rivlin and former Sen. Pete Domenici projected about $2 trillion in deficit reduction over the coming 20 years if Medicare was moved to an insurance exchange system in which beneficiaries were provided risk-adjusted premium support payments.

That approach drew support from at least one other Democrat at the hearing, Sen. Ron Wyden of Oregon, who argued that such an insurance exchange would obtain ongoing savings through the public Medicare program competing with private plans for Medicare customers.