Saving Medicare: A market cure for an ailing program

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    Saving Medicare: A market cure for an ailing program
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Article Highlights

  • Fiscal crisis is the perfect catalyst for reforming Medicare.

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  • Premium support for Medicare would provide more efficiency.

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  • Medicare spending will outpace economic growth for the foreseeable future.

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Medicare is at the center of the ongoing debate over the country’s fiscal future, but there is a palpable fear that any change could “end Medicare as we know it.”[1] Policymakers worry that an honest assessment of Medicare’s finances would be punished at the polls by seniors who do not want their health benefits threatened. As a result, the debate over Medicare has been couched in comforting but misleading terms. Candidates for office say they want to strengthen the program, not undermine it with reforms that are, in fact, necessary if Medicare is to serve future generations.

As the largest federal health program, Medicare finances the care of more than 50 million Americans at a cost approaching $600 billion in 2012.[2] As the largest purchaser of health services with the regulatory powers of government to back it, Medicare and its policies shape the way health care is delivered to all 312 million people living in the United States. One dollar out of every five that is spent on health care in this country is paid by the Medicare program. Despite the recent recession-induced slowdown in spending (for both Medicare and overall health spending), the program spending is expected to accelerate. Unless reforms are adopted, Medicare spending will outpace growth in the economy for the foreseeable future.[3]

Congress enacted health reform legislation in 2010 that failed to address Medicare’s structural defects that are largely responsible for this dismal fiscal outlook. The Patient Protection and Affordable Care Act did not change Medicare’s financial incentives that reward the provision of more services, not more effective services. An alternative approach, known as premium support, would rely on the forces of competition and consumer choice to promote more efficient health care that could lower costs and improve outcomes throughout the health sector.

“Premium support” is on everyone’s lips, but more often as a badge of fidelity to a political party than as part of a serious discussion about Medicare’s impending crisis and what to do about it. Members of the Democratic Party typically say premium support means vouchers and “ending Medicare as we know it.” Members of the Republican Party typically say premium support gives seniors choices, promotes competition, and saves Medicare from dismantlement. Political debate does not often permit a careful discussion of Medicare’s problems and potential solutions. This volume seeks to remedy that limitation of election-year discourse and provide a guide to sustainable long-term Medicare reform.

The president and the next Congress will face unprecedented challenges to kick-start a lagging economy and to rein in the federal deficit. The fiscal crisis provides both the opportunity and the necessity for policymakers to undertake the difficult task of reforming the Medicare program. In so doing, we can finally begin the journey to a health system that works.

Notes

1. Angie Drobnic Holan, "Did Republicans Vote to End Medicare 'As We Know It'?" Politifact, August 23, 2012, www.politifact.com/truth-o-meter/article/2012/aug/23/did-republicans-vote-end-medicare-we-know-it/.

2. Sean O. Keehan et al., "National Health Expenditure Projections: Modest Annual Growth until Coverage Expands and Economic Growth Accelerates," Health Affairs 31, no. 7 (July 2012): 1600-1612, http://content.healthaffairs.org/content/31/7/1600.full.

3. Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, "2012 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds," April 23, 2012, figure II.D.1, www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/downloads/tr2012.pdf.

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