There’s No Limit on Irresponsibility

Jun

There’s No Limit on Irresponsibility

Lauren Burgmann Insurance Tips 2011-06-25

Sens. Tom Harkin (D-Iowa) and Jack Reed (D-R.I.) want to make Medicare off-limits in negotiations over raising the federal governments debt limit. They argue that Medicare is too “complicated” (read: politically dangerous leading up to an election) to address when the heat is on concerning the debt. The upset victory of Kathy Hochul in upstate New York sends a clear message to politicians about the risks of leveling with the public about Medicares fiscal problems.

Harkin and Reeds statements confirm Bill Clintons fears that Democrats will take this as an excuse to sit idly by while Medicare continues to drive up the federal debt. Better to say nothing than to antagonize millions of voters who desperately want to believe that Medicare can indefinitely foot the bill for seniors health care regardless of the cost, without any negative consequences.

Over the next 75 years, Medicares obligations will exceed its revenue from payroll taxes, premiums, and other earmarked sources by $24.4 trillion…

The problem for Democrats–and for Republicans who are getting cold feet about the House-passed budget resolution that takes the gloves off on Medicare–is that the governments promises cannot be kept. The Medicare trustees reported that Medicares Hospital Insurance (HI) trust fund will be exhausted in 2025, even with program savings (mainly cuts in provider payment) under the Affordable Care Act (ACA) that are “debatable.” HI has been in deficit since 2008, and that deficit is projected to grow forever. Over the next 75 years, Medicares obligations will exceed its revenue from payroll taxes, premiums, and other earmarked sources by $24.4 trillion–and that assumes ACAs payment cuts all go through.

Sen. Harkin asserted that Medicare “has nothing to do with the default crisis right now.” That could not be further from the truth. Medicare spending has long outpaced economic growth, absorbing increasing shares of the budget with no end in sight. He is correct that reaching a bipartisan solution to Medicare financing problems would take time, although his prediction that it would take “weeks” is off by at least an order of magnitude. Congress can adopt policies now that at least start Medicare on a 12-step program that will control, if not cure, its addiction to taxpayer dollars.

The first step is to admit that Medicare has a problem. The Obama administration has portrayed ACA as beneficial to seniors. The administration has claimed that seniors can expect greater savings, increased quality, and greater control over their care. Medicare would be kept solvent, and benefits would remain unchanged.

The debt limit talks should emphasize the fiscal challenges posed by the major entitlement programs, including Medicare.

Those claims are directly refuted by the trustees and by Medicares actuary. Medicares solvency has worsened. The savings (if they are realized) accrue primarily to the government, not seniors, and will be spent on insurance subsidies for younger people. In a report accompanying the trustees report, the actuary points out that the payment cuts now in law would mean that Medicare will pay the same rates as Medicaid, driving perhaps 25 percent of hospitals, skilled nursing facilities, and home health agencies out of Medicare by 2030. Although Medicares benefits would remain on the books, access to those services would be severely restricted as providers flee while the baby boom generation floods into the program.

Rather than continuing to claim that Medicare remains secure, it is time to begin lowering everyones expectations about what the program will be able to do in the future. The best way to do that is in the broader budget context that the debt negotiations must address. The health policy debate has remained siloed for too long, giving the impression to the public that health spending has primacy over other spending priorities.

The debt limit talks should emphasize the fiscal challenges posed by the major entitlement programs, including Medicare. The public should be told what they would give up by allowing these programs to continue to operate as if there are no resource limits. That translates into less federal dollars for education, public infrastructure, and the like. It also translates into higher taxes as states struggle with rising health costs, unsupportable pension programs, and a stagnant economy. Choices must be made over where and how to cut spending, and it is imperative that an informed public be brought into the discussion.

This will not be a kumbaya moment with Democrats and Republicans joining hands over Medicare reform. But it could start the kind of adult conversation that has been sorely lacking. Most politicians are already in campaign mode, using one-liners to criticize rather than clarify difficult issues. Another year and a half of that will only push the political factions further apart, making responsible action even more difficult than it is today. (For the interested reader, I commend Alain Enthovens recent article that cleared up some of the misconceptions attributed to Rep. Paul Ryans Medicare plan.) Congress will eventually raise the debt limit, just as it has 51 times since 1978. This does not have to be a meaningless exercise that merely pushes aside an ineffective fiscal constraint. It can sow the seeds for real reforms in the next presidential term if politics does not overwhelm policy.

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