Congress are growing concerned that the Medicare bills now being
considered in conference will constitute a huge new unfunded
liability - equivalent to a two-thirds increase in the $3.8
trillion in public debt.
President nor responsible lawmakers should accept a Medicare bill
that adds to the unfunded liabilities of Medicare and does not
contain serious reform. Failure to take such a stand undoubtedly
will result in a continued stampede to enact a measure that does
little or nothing to resolve the problems of Medicare while
effectively imposing an enormous new tax on future generations.
Tom Saving estimates that the cost of the additional obligations in
the Senate bill is equivalent to a two-thirds increase in the $3.8
trillion in public debt. In addition to this staggering new burden,
many of these members and other lawmakers are also distressed that
serious reform of the Medicare program will fall by the wayside in
a desperate rush to pass a politically attractive new entitlement
program for middle class Americans.
chiefly conservative, House members wrote to Speaker Dennis Hastert
(R-IL) during the House debate to make two things clear:
- That their
support for a final conference report on the measure depends on the
legislation including a key House provision that would - but only
seven years from now - introduce serious reform modeled after the
Federal Employee Health Benefits Program (FEHBP).
- That there must
be serious cost controls in the final legislation to rein in the
cost on future generations.
lawmakers are right to draw attention to these requirements of a
responsible bill. It is important now that these and other members,
and the President, clearly indicate what an acceptable bill would
look like. Specifically, neither the President nor responsible
lawmakers should accept a Medicare bill that adds to the unfunded
liabilities of Medicare and does not contain serious reform.
Failure to take such a stand undoubtedly will result in a continued
stampede to enact a measure that does little or nothing to resolve
the problems of Medicare while effectively imposing an enormous new
tax on future generations.
Two Critical Elements
There are two
critical elements required for a responsible Medicare drug
The bill must
contain genuine reforms modeled on the FEHBP.
The bill must impose
no new net unfunded liability on future generations beyond the $400
billion in the current budget resolution.
these elements entail:
1) Genuine reforms
modeled on the FEHBP.
Section 241 of the
House bill would introduce some elements of FEHBP-style
competition, but these would be delayed until 2010. The conference
should build on this provision and on the 1999 work of the National
Bipartisan Commission on the Future of Medicare, headed by
Representative Bill Thomas (R-CA) and Senator John Breaux (D-LA),
which was followed by legislation sponsored by Senators John Breaux
and Bill Frist (R-TN), to craft an FEHBP-style reform of the
program. Key elements of a reform based on that approach should
include the following:
Any private plan
meeting basic threshold standards should be able to market its
services to seniors.
and detailed benefit requirements should not be imposed on private
plans. Moreover, Medicare plans, just like FEHBP plans, should also
be able to modify their benefits over time as they strive to
reflect consumer choice while seeking to offer the best value for
money. Seniors, not government officials, should decide what
constitutes a good plan.
of the traditional fee-for-service Medicare program should be
separated from the management of the overall Medicare program, as
the current House bill would do. There is an inherent conflict of
interest if traditional Medicare and the competing private plans
are both administered ultimately by the same officials at the
Centers for Medicaid and Medicare Services.
for the new benefits must be inextricably linked to the timetable
for reforms. A delay in reforms must mean a delay in new benefits.
No reforms must mean no new benefits. If new benefits are scheduled
to go into effect before serious reforms, the probability is that
those reforms will never be implemented.
Imposing no new net new unfunded liability
The new unfunded
liability (i.e. tax) on future generations should be limited to the
$400 billion over 10 years already included in the budget
resolution. Bearing in mind that the demands on Medicare will
expand sharply after that 10-year "window", a responsible bill must
phase in steps during that period that will achieve a permanent
drug benefit that imposes no net new obligation to the already
unsustainable Medicare program. Failure to do that means imposing
the equivalent of huge new taxes on future generations.
To avoid new taxes
the bill must include real and efficient expenditure controls
designed to trigger long-term savings within the Medicare program.
To be sure, Congress could enact expenditure controls that could be
disastrous to seniors and the Medicare program. Imposing price
controls on the health care industry, for example, might hold down
expenditures but only by producing the same inefficiencies and
service shortages that always result from price controls.
spending controls actually means controlling and focusing the
taxpayers' funds committed to the program, allowing the market to
adjust to that subsidy and allowing beneficiaries to spend their
own funds as they wish. Options to achieve that goal could
income related premiums and benefits throughout traditional
Medicare and income-related payments to managed care plans.
Affluent seniors should not enjoy the same subsidies as the needy
while passing the tab to everybody's children and
- Assuring that the
net budget cost of the drug benefit does not exceed budgeted costs
during the next ten years by automatically increasing cost sharing
for middle and upper income retirees to keep within the spending
- Directly limiting
the taxpayer cost by transforming Medicare into a program that
annually makes a contribution to the costs of services, or a chosen
plan, up to a specified limit. The FEHBP operates in this way, with
a proportion of premium costs covered by the government up to a
maximum amount. Such a fixed contribution can be adjusted according
to income, but it would allow Congress to cap the long term
unfunded cost of Medicare with a drug benefit to no more than the
current program cost after 10 years.
In all probability this
legislation, if enacted, will be the last opportunity to address
the shortcomings of the Medicare program. Soon the aging Baby Boom
generation will make it politically impossible to enact serious
reforms to deal with the program's staggering liabilities. This
political fact means that this Congress must face up to the task of
legislating real reform, modernizing the program and taking sound
and decisive steps to eliminate new unfunded liabilities. Simply
adding a new benefit and sharply increasing the unfunded burden
being passed on to future generations would be