July 10, 2003 | WebMemo on Health Care
Members of 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.
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.
New Entitlement Program
Medicare Trustee 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.
Several dozen, chiefly conservative, House members wrote to Speaker Dennis Hastert (R-IL) during the House debate to make two things clear:
Conservative 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.
There are two critical elements required for a responsible Medicare drug bill:
Specifically, 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:
2) 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.
Appropriate 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 include:
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 unconscionable.