A time for solutions: finding consensus in the Medicare reform debate

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Thank you, Chairman Kohl, Ranking Member Corker, and members of the Committee for the opportunity to discuss Medicare reforms that can responsibly slow the growth of program spending and help set this country on a sustainable fiscal path.

I am Joseph Antos, the Wilson H. Taylor Scholar in Health Care and Retirement Policy at the American Enterprise Institute (AEI), a non-profit, non-partisan public policy research organization based in Washington, D.C. I am also a member of the panel of health advisers for the Congressional Budget Office (CBO), and I was formerly the Assistant Director for Health and Human Resources at CBO. My comments today are my own and do not necessarily reflect the views of AEI, CBO, or other organizations with which I am affiliated.

Numerous experts, commissions, and other organizations have advanced a variety of proposals intended to strengthen the economy and bolster the nation’s fiscal health. There is a broad consensus that slowing the growth of federal health spending is essential if we are to achieve these goals. Federal health spending has grown faster than the economy since the creation of Medicare and Medicaid in 1965. Unless strong action is taken, federal health spending will continue to outpace the economy for the indefinite future.

Medicare reform is essential if we expect to avert this crisis. Medicare spending will double over the next decade, increasing from $555 billion in 2011 to more than $1 trillion annually in the early 2020s.1 The first of the baby boom generation turned 65 this year and enrolled in Medicare. Over the next two decades, some 70 million people will move out of the work force, into retirement and into Medicare. That will place an increasing burden on the budget and on younger generations whose taxes support the program.

The Budget Control Act creates an opportunity for Congress to address these serious issues. The Joint Select Committee on Deficit Reduction is charged with developing a plan that would reduce the federal deficit by at least $1.2 to $1.5 trillion, and the Act provided expedited procedures to permit enactment of the plan by December 23. There is a growing consensus among policymakers and the public that Congress should adopt prudent policies to avert fiscal calamity.

Although Medicare reform remains controversial, there are also important areas of agreement, at least among policy experts. Immediate action can be taken on those areas of agreement, which would allow policymakers more time to focus on more fundamental disagreements. However, the adoption of less complex and less controversial deficit-reduction options does not absolve Congress from grappling with structural reforms necessary to ensure that Medicare will continue to provide essential health benefits for future generations.

Antos is the Wilson H. Taylor scholar in healthcare and retirement policy at AEI and a health adviser to the Congressional Budget Office (CBO).

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