By David Lazarus
There’s no simple or straightforward solution to Medicare’s funding woes. At least with Social Security’s looming troubles, the remedies can be narrowed down to three fundamental (albeit unpleasant) options: raise taxes, reduce benefits or borrow a big pile of money.Ā It’s not so easy with Medicare.
“We cannot solve the problems that face Medicare without dealing with the broader problems that face health care in America,” said Robert Reischauer, president of the nonpartisan Urban Institute — a Washington think tank — and former director of the Congressional Budget Office.
Medicare and Social Security are plagued by the same demographic challenge– the pending retirement of millions of Baby Boomers. Both programs face huge funding shortfalls as fewer workers pay into each system and more retirees take money out.
In the case of Medicare, however, the fiscal difficulties come sooner and are considerably larger. Also, Medicare’s situation is greatly exacerbated by runaway prices for medical treatment and medication.”You can’t solve this by looking at Medicare alone,” Reischauer said. “There are systemic issues that have to be addressed as well. That’s the real problem.”
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Medicare is the $350 billion-a-year federal health insurance program primarily for people over 65 or those with disabilities. It has about 42 million beneficiaries. (Medicare’s sister program, Medicaid, provides health coverage for about 44 million low-income recipients.)
As I reported Friday, Medicare costs are expected to surpass those of Social Security by 2024. By 2078, Medicare’s annual expenditures will be twice as large as Social Security’s.
The portion of Medicare that pays for hospital stays — the largest component of the program — is expected to be in the red five years from now. It will then have to start spending reserve funds.
By 2019, those reserves are expected to be gone and the program will no longer be able to pay full benefits. Medicare’s deficit over the next 75 years is projected to run as high as $27.7 trillion, compared with a $3.7 trillion shortfall for Social Security over the same period.
Leslie Norwalk, deputy administrator of the Centers for Medicare & Medicaid Services, the government agency overseeing Medicare, said a funding gap of nearly $28 trillion appears daunting, but “within a 75-year window, a lot can happen.”
“There’s a long time between now and then,” she said. “When you think about how much the health care system has changed, it’s very hard to sit in my chair and imagine how things will be 75 years from now.”
Much could happen, Norwalk believes, that could bring down the cost of health care for future generations. But Robert Moffit, director of the Center for Health Policy Studies at the conservative Heritage Foundation, said it’s far more likely that researchers will come up with new drugs and new treatments that will further extend people’s life spans.
“These kinds of breakthroughs will be terribly expensive,” he said. “This will only add to Medicare’s costs.” Reischauer at the Urban Institute said he would tackle Medicare’s issues by effectively reinventing the nation’s health care system.
“I would start at ground zero,” he said. “I would spend a significant amount of money on an independent body charged with evaluating all the procedures and devices in health care and writing practical guidelines.”
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By following such national guidelines, Reischauer argued, health plans and health care providers throughout the country would be able to eliminate redundancies and introduce new efficiencies.
“We need to begin building a new system brick by brick, and the system needs to be evidence-based,” he said. That’s all well and good, responded Heritage’s Moffit, but it’s not politically realistic to think that the United States can simply throw its existing health care system out the window and start again from scratch.
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“We can’t do it all at once,” he said of fixing Medicare’s problems. “It’s too big to do all at once.” Moffit’s solution involves changing the Medicare program at first only for the Baby Boomers — those turning 65 after 2010. He would replace the average $6,500 now spent annually on Medicare beneficiaries with a yearly subsidy, perhaps in the form of a tax credit.
Recipients in turn would use the money to choose their own health care plan based on individual needs. If someone wants to spend all his cash on Viagra — which is covered under President Bush’s costly new Medicare drug benefit — that would be his decision.
“This would address some of the long-term cost issues,” Moffit said. “It would not be an open-ended entitlement. “We’re going to be spending a lot more on the Baby Boomers than we did on the World War II generation,” he pointed out. “There’s just a lot more of them. ”
Medicare’s Norwalk called Moffit’s suggestion “a very interesting proposal.” But, she added, “I don’t see it as politically viable.” Ida Hellander, executive director of Physicians for a National Health Program, a Chicago advocacy group, said Medicare’s woes demonstrate the need for universal medical coverage in the United States.
The clear solution, she said, is a so-called single-payer system similar to national health plans in Canada and elsewhere. “You can’t control costs,” she said, “until you have a uniform system.”
Under a single-payer system, any citizen could be treated by any doctor at any hospital. Payroll taxes would replace all existing premiums,deductibles and co-pays.
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Medicare could serve as the bedrock for creation of a single-payer system. Between that program, Medicaid and Veterans Affairs, Hellander said, taxpayer funds already account for about 60 percent of U.S. health spending.
In California, state Sen. Sheila Kuehl, D-Santa Monica, plans to introduce legislation this week that would establish a single-payer system for state residents.
A recent report by the Lewin Group, a well-regarded health care consulting firm, determined that universal coverage along the lines of what Kuehl is proposing would reduce health care spending in California by $8 billion next year alone.
It also would provide coverage for the nearly 6 million uninsured people statewide and result in lower costs for virtually all California companies now providing insurance to employees, Lewin found.
Heritage’s Moffit rejected the notion of a single-payer system in this country. “That’s exactly the way to go if you want to reduce quality and personal freedom,” he said.
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However, Reischauer at the Urban Institute said single-payer may ultimately hold the answers not just for Medicare but also covering the 45 million Americans now lacking health insurance.
“If push came to shove, I would want a single-payer system instead of the system we have now,” he said. “But the political obstacles to that are considerable.”
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There it is again — politics. Proposals for improving health care from both the left and right are routinely dismissed as being politically unrealistic.
All that remains is a sense of chronic crisis and a leadership vacuum when it comes to tackling some of the most important issues facing this country.
Medicare, like Social Security, can be salvaged. It won’t be easy. It will be damned painful, in fact. But we’ll never know how painful unless we try. David Lazarus’ column appears Wednesdays, Fridays and Sundays. He also can be seen regularly on KTVU’s “Mornings on 2.”
Send tips or feedback to: dlazarus@sfchronicle.com.
Copyright 2005 SF Chronicle
