Chickening Out on Medicare

Both parties agree that the program is unsustainable without deep cuts. But once again, neither is willing to show the way.

Sen. Patty Murray, D-Wash., chair of the Senate Budget Committee, prepares for a day of work on the Democrats' spending strategy during a markup session of the budget, on Capitol Hill in Washington, Thursday, March 14, 2013. (AP Photo/J. Scott Applewhite)
Margot Sanger Katz
Add to Briefcase
Margot Sanger-Katz
March 14, 2013, 4:10 p.m.

There wer­en’t many sur­prises in the budgets each party re­leased this week, but here was one: Sen. Patty Mur­ray’s Demo­crat­ic pro­pos­al had more than double the cuts to the biggest health en­ti­tle­ment, Medi­care, as Rep. Paul Ry­an’s Re­pub­lic­an pro­pos­al did. Des­pite the House Budget chair­man’s fre­quent cri­tique of Medi­care sus­tain­ab­il­ity, he would trim only $129 bil­lion over 10 years, mostly by cap­ping mal­prac­tice awards and by ask­ing seni­ors to pay high­er premi­ums and high­er prices for pre­scrip­tion drugs. (After that, his fam­ous “premi­um sup­port” plan — which gives seni­ors a fixed pay­ment to shop for their own in­sur­ance — would be­gin.) Mur­ray’s plan goes fur­ther on sav­ings but falls short on spe­cif­ics: She says only that spend­ing should be trimmed by $265 bil­lion and leaves the de­tails to her Sen­ate Budget Com­mit­tee col­leagues. That prob­ably means pro­vider pay cuts and re­duced drug sub­sidies for low-in­come seni­ors. Con­sid­er­ing that Medi­care is the biggest long-term driver of the coun­try’s de­fi­cit, Ry­an’s and Mur­ray’s fixes are pretty un­der­whelm­ing. “The num­bers are really a little bit sur­pris­ingly low to me,” says John Ho­la­han, a fel­low at the non­par­tis­an Urb­an In­sti­tute.

Both sides could go a lot fur­ther if they really wanted to wring spare dol­lars from the health care pro­gram, and they could do it even while achiev­ing their stated goals — achiev­ing some “struc­tur­al” changes that raise rev­en­ue but pro­tect seni­ors from cost shifts or be­ne­fit cuts that would en­danger their cov­er­age. That’s the con­clu­sion of a new Urb­an In­sti­tute re­port, which skips premi­um sup­port but still finds more than $500 bil­lion in Medi­care sav­ings. (It also pro­poses rais­ing the Medi­care payroll tax to bring in an ad­di­tion­al $200 bil­lion.)

The biggest prob­lem with Medi­care isn’t in­ef­fi­ciency, waste, or fraud. It’s the com­ing wave of baby-boomer re­tire­ments. Those seni­ors will nearly double the pro­gram’s size by 2030. Even though Medi­care has just en­joyed three years of re­cord-low spend­ing growth and is on track to stay lean, it will still be­come much more ex­pens­ive as boomers sign up. Pro­pos­als such as Ry­an’s premi­um-sup­port mod­el, which try to hold down per-per­son spend­ing, don’t ad­dress that real­ity, Ho­la­han says. And, as Demo­crats are fond of point­ing out, the GOP plan could force seni­ors to pay more if com­pet­ing private plans turn out to be more ex­pens­ive than the big gov­ern­ment pro­gram would have been.

So the Urb­an In­sti­tute’s biggest re­form would cap the amount seni­ors could be asked to spend — mak­ing Medi­care a bet­ter in­surer of cata­stroph­ic care. Then, it would merge the pro­gram’s hos­pit­al and doc­tor por­tions, char­ging one set of premi­ums and de­duct­ibles for the full pack­age of be­ne­fits. The com­bined num­ber would be high­er than it is now — that’s where the sav­ings come from — but wealthy seni­ors would pay more and poor ones would pay less. This re­struc­tur­ing might even elim­in­ate the need for the sup­ple­ment­al private in­sur­ance many seni­ors now buy to pro­tect them from big bills. This pro­pos­al re­sembles a plan that Vice Pres­id­ent Joe Biden and House Ma­jor­ity Lead­er Eric Can­tor once con­sidered in de­fi­cit-re­duc­tion talks.

Con­tro­ver­sially, con­gres­sion­al Re­pub­lic­ans want to raise Medi­care’s eli­gib­il­ity age to 67; the Urb­an au­thors pro­pose a way to do that while leav­ing few­er be­ne­fi­ciar­ies in the lurch. They would al­low young­er seni­ors who are no longer guar­an­teed Medi­care be­ne­fits to buy their way in­to the pro­gram — with tax cred­its to help those with lower in­comes. The re­port echoes Sen­ate Demo­crats’ likely ap­proach in cut­ting drug-com­pany pay­ments for poor seni­ors. It also sug­gests rais­ing the drug-be­ne­fit and treat­ment premi­ums for rich­er seni­ors. The plan in­cludes a num­ber of oth­er small and more-fa­mil­i­ar tweaks and cuts. And then there’s the big item that no one on Cap­it­ol Hill is talk­ing about: a payroll-tax hike to shore up Medi­care’s solvency. That change would bring in a lot of money but is un­likely to in­terest even con­gres­sion­al Demo­crats, who say of­ten that a de­fi­cit deal must in­clude new rev­en­ue.

The Urb­an plan’s au­thors re­com­mend scrap­ping an old cost-sav­ing for­mula for doc­tor’s pay that has proved to be a dis­aster. Im­pos­ing a per­man­ent “doc fix” (that is, nix­ing a con­stantly de­ferred pay cut for phys­i­cians) would cost some $133 bil­lion — more than all of Ry­an’s Medi­care sav­ings. Mur­ray’s plan would roll back the loom­ing cuts, eras­ing half of her pro­posed sav­ings. Ry­an’s budget en­dorses the doc fix only in the­ory; he neither in­cludes it nor pays for it on his bal­ance sheet. The Urb­an re­port, by con­trast, found so much to trim that it can im­pose the doc fix and still show ma­jor sav­ings.

If Con­gress and the pres­id­ent ever achieve a grand bar­gain, the Medi­care cuts are likely to be much deep­er than the fig­ures in either Ry­an’s or Mur­ray’s budget That would be a hard pill for law­makers on both sides to swal­low. Demo­crats see them­selves as the pro­tect­ors of “Medi­care’s guar­an­tee” to seni­ors, and Re­pub­lic­ans have come to rely on the votes of older Amer­ic­ans to win elec­tions. But both parties could cut more than they’ve offered without gut­ting Medi­care. In fact, Pres­id­ent Obama’s pro­pos­al has already done so. His open­ing of­fer in se­quester ne­go­ti­ations: nearly $400 bil­lion.

What We're Following See More »
Trump: Time to Let Obamacare “Explode”
22 hours ago
At Trump’s Behest, Ryan Pulls Healthcare Bill
23 hours ago

Faced with a choice of Trump's way or the highway, the GOP chose the highway. In the worst possible development for the GOP, Speaker Paul Ryan pulled the healthcare bill from the floor for the second day in a row—even after President Trump demanded an up-or-down vote last night. According to multiple reports, Trump himself called Ryan at about 3 p.m. to tell him to cancel the vote. Trump has since blamed Democrats for the defeat. It's unclear when the legislation will be revisited.

Comey at White House Now
1 days ago
Nunes, Schiff Ask for Closed-Door Testimony on Russia
1 days ago

"House Intelligence Committee Chairman Devin Nunes (R-CA) said he and ranking Democrat Adam Schiff of California have asked FBI Director James Comey and NSA Director Mike Rogers to testify behind closed doors about the committee's ongoing investigation into alleged ties between the Trump administration and Russia." He also said former Trump campaign manager Paul Manafort will also testify.

Paul Ryan en Route to White House
1 days ago

Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.