March 28, 2001

March 28, 2001 | Commentary on Health Care

Taking The Scare Tactics Out Of Medicare Reform

There they go again. For decades, Social Security was the "third rail" for elected officials--touch it and you die. Now it seems some people want to make Medicare the new political career-killer.

Critics of President Bush's proposed tax cuts are trying to derail his plan by claiming it would make Medicare insolvent by 2010, 19 years sooner than the program's trustees estimate.

According to The Washington Post, tax cut opponents believe they can use the "Byzantine financing" of the Great Society program to their advantage and defeat Bush's proposal.

Their claims aren't true--Bush's plan, in fact, would preserve the entire Medicare surplus--but it's not a bad political strategy.

Some 39 million elderly and disabled people depend on Medicare for health insurance. What politician wants to mess with something that helps Grandma and people in wheelchairs?

Anyone who really wants to help those who depend on Medicare, that's who. The program is in serious trouble. Absent reform, its claim on the federal budget will jump from 12 percent today to between 28 percent and 38 percent by 2030, when the baby boomers are well into retirement.

For younger workers, this will mean even higher taxes. Medicare can and must be improved, with a few ideas that won't hurt anyone, such as:

* The "Grandfather" Effect. Fixing Medicare isn't about the present. It's about the future. Bush should limit reform to a new generation of retirees starting at a certain date--perhaps around 2011, when 77 million baby boomers start to retire.

After the new program is up and running, Congress can make it available to older retirees, who can opt in if they consider it a better deal.

This "grandfathering-in" approach to government programs has worked before. The British in the 1980s made major changes in their Social Security program by protecting current workers or retirees while expanding private retirement opportunities for younger workers who were getting shortchanged under the old system.

* Take Two Paths. Medicare reform should be a sure bet: Everybody wins and nobody loses what they already have. If Congress wants to tinker with the Medicare program--say, by changing reimbursements for doctors and hospitals, or by altering rules that govern the Medicare-Choice program or Medigap coverage--it can.

But it should do that separately from Medicare reform that affects the next generation of retirees. This will spare the country the scare tactics that usually accompany serious efforts to improve the program and ease the fears of current retirees about their benefits.

* Good For Congress, Good For Us. If Bush needs a model for a good health care program, he should look no further than the Federal Employees Health Benefit Program (FEHBP), which covers all federal employees, including Congress.

In the program, all plans offer prescription drugs, and almost all plans pay between 80 percent and 90 percent of drug costs. Moreover, FEHBP plans have catastrophic coverage that includes the cost of prescription drugs.

The program offers an excellent method to assure flexible benefit programs. Without locking a future Medicare Board or independent agency into legislative details that can't evolve with the constantly changing health care field, Bush and Congress should require a basic level of services in any plan wishing to compete in the new Medicare choice system. These would prescription drug coverage, catastrophic coverage, hospitalization and physician services.

Bush also should note that the politics of Medicare, characterized by lobbying that aggravates the program's notorious complexity, tend to be absent in the FEHBP.

That's because it's largely a consumer-driven system. Major decisions are made not by bureaucrats but by consumers and the hundreds of competing plans trying to earn their business by offering good benefits at good prices.

We can't allow Medicare to become the new "third rail" of American politics. It took more than 40 years for Social Security reform to become "safe" for politicians to offer reforms. The country can't afford to wait that long with Medicare.

Robert E. Moffit is director of domestic policy studies at The Heritage Foundation (www.heritage.org).

About the Author

Robert E. Moffit, Ph.D. Senior Fellow
Center for Health Policy Studies

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