Medicare Debate Will Decide Entitlement Future

Published May 31, 2016

The escalating political debate about the future of Medicare reveals a fear of change coupled with the growing recognition that change is essential to sustain the program for the future.

Medicare is facing $38 trillion in red ink. The recent Medicare Trustees report showed the program is careening toward bankruptcy and will run out of money in 2024 – five years faster than the trustees predicted just one year ago.

And to make it worse, the chief actuary for Medicare, Richard Foster, issued a dissenting opinion to the report, explaining that even those dire predictions are based upon politically unrealistic spending cuts that neither he nor anyone else expects to happen.

Unrealistic Assumptions in Obamacare

President Barack Obama’s health-care law passed last year relies on cuts in payments to doctors, hospitals and other Medicare providers, starting with a 30 percent cut at the end of this year and further cuts year after year. Eventually, two out of five providers would either go bankrupt or be forced to stop seeing Medicare patients altogether.

Not changing Medicare is not an option. Yet the prevailing wish appears to be that politicians will simply leave Medicare alone.

But without a serious course adjustment, the program faces a steep and inevitable decline. Medicare will become a third-rate, price-controlled program that rations a lower-quality of care through waiting lines and other restrictions.

If Medicare’s antiquated, open-ended, fee-for-service model isn’t reformed, then we will continue to pour deficit-funded dollars into the program or raise taxes to levels that would topple the economy as millions of baby boomers hit retirement.

Ryan Recognizes Reality

House Budget Chairman Paul Ryan, R-Wis., recognizes that reality in his proposal to begin modernizing the program, starting 10 years from now. He wants the next generation of seniors to have more choices and lower costs through competition. They would get guaranteed private coverage through a modernized Medicare program that works much like the health program members of Congress have today.

The Congressional Budget Office has shown the Ryan plan will save Medicare and keep the economy from collapsing under the weight of massive entitlement spending.

The president railed at Rep. Ryan for his plan, claiming it would leave seniors destitute. That is a false charge, and it deflects attention from the fact that the president already has led the effort to make major changes to Medicare.

Changes Already Made for the Worse

The president’s health law is financed through $575 billion in Medicare spending cuts to help fund two new entitlement programs. This spring, the president proposed doubling down on those cuts by taking an additional $480 billion out of the program to lower the deficit.

If even a fraction of these cuts take place, a whopping 87 percent of doctors say they will stop seeing or will restrict the number of Medicare patients they see, further shrinking the pool of providers and further restricting access to care.

There’s no question rationing will ensue. The powerful fifteen member Independent Payment Advisory Board (IPAB) will try to squeeze Medicare payments into health care’s global budget in a futile attempt to use price controls to meet ever-elusive spending targets.

Access to new medicines and cutting-edge medical equipment will diminish. Payment restrictions and the politicization of medical decisions will give companies less incentive to take the huge capital risks to invest in new products. And the government is targeting drugs and devices—which often are the most cost-effective treatments overall—in its futile effort to rein in spending.

The only way to save Medicare is to change it. Voters face a clear choice. Do we want to continue down a path of price controls, restrictions on access and government-rationed health care? Or do we want to modernize Medicare—and save it—so seniors have the security of access to care and choices of coverage with competition driving costs down?

Grace-Marie Turner ([email protected]) is president of the Galen Institute. This column is adapted from an article on the institute’s website, Used with permission.


Internet Resources:

Centers for Medicare and Medicaid Services: 2011 Annual Medicare Trustees Report