How Medicare Can Be Saved
Instead of beginning nonpartisan discussions to fix Medicare, the health insurance program that millions of seniors depend on and that contributes enormously to our long-term debt, Congress has turned the Medicare funding crisis into another excuse for partisan pugilism. It is enough to make you want to become an independent.
Democrats are right when they say the public wants to keep Medicare as a government-run program. Republicans are right when they say that the current Medicare benefit structure is unaffordable.
Medicare cannot be fixed without both more revenue and significant changes in its premium and benefit structure. The first is reflexively opposed by Republicans, and the second is reflexively opposed by Democrats — yet both sides are well aware of the demographic and economic realities facing the program. Bottom line, Medicare is hurtling toward its demise — our government is approaching a cataclysmic fiscal tipping point — while Washington is busy posturing for the next election.
We can and must work together to fix Medicare now. Doing so would send a powerful and necessary signal to financial markets that we are addressing our long-term fiscal challenges. It would prove to our constituents that we can still come together to fix a program that they want and need. In fact, showing that we can work across party lines to solve one of our toughest fiscal problems is probably the best thing we can do to stimulate confidence in our economy, and that will lead to more capital investment and more jobs.
With this goal in mind, I am drafting legislation that will preserve Medicare without privatizing it by saving at least $200 billion in Medicare spending over the next 10 years and extending Medicare’s solvency by approximately 20 years. These figures are based on estimates by the independent Congressional Budget Office of ideas comparable to the ones I am proposing.
First, I will propose raising the Medicare eligibility age every year starting in 2014 by two months until it reaches 67 in 2025. So if you turn 65 in 2014, you will have to wait an additional 60 days before you become eligible for Medicare. That’s a small sacrifice to ask for the benefits you will receive from a healthy Medicare program for the rest of your life.
Second, I will propose reforming the complex Medicare benefit structure, which is wasteful, misunderstood by nearly all Medicare enrollees and prone to over-utilization and fraud. We can fix these long-standing problems by implementing a single, combined Part A and Part B deductible, requiring a co-pay on all Medicare services and adding a maximum out-of-pocket benefit that will give seniors peace of mind by promising them they will not have to pay more than a set amount of their health-care costs annually.
Third, it is time to reform the premium structure. When Medicare was designed, the premiums paid by beneficiaries supported 50 percent of the program. Today they pay only 25 percent of total costs. This results in an enormous drain on our federal budget and is one of the leading drivers of our annual deficits. I will propose that we raise the premiums for all new enrollees in Part B (doctor’s services) and Part D (prescriptions) starting in 2014 to 35 percent of program costs.
Asking Americans to pay more won’t be popular, but doing nothing and allowing Medicare to go bust won’t be popular either.
Fourth, we need to reform the way Medigap policies work. Many studies have found that Medicare enrollees who have supplemental coverage use as much as 25 percent more services than those with only traditional Medicare coverage. The result of this increase in utilization is a higher overall bill for taxpayers, not the holders of these policies.
Fifth, we cannot keep Medicare working for seniors by only reducing benefits or making adjustments to the premium structure. We also need to raise more revenue. I will propose that higher-income Americans pay an additional 1 percent of every dollar they earn over $250,000 to help save the program.
I offer these ideas as a starting point for discussion to show we can extend the solvency of Medicare and reduce our national deficit and debt. The truth is that we cannot save Medicare as we know it. We can save Medicare only if we change it. I realize that each of the reforms is bound to make some people unhappy and that supporting such legislation entails political risk. But unless members of Congress are willing to take risks together, the big losers will be our great country and the people who elected us to lead it.