MAY 17, 1999 VOLUME 6, NUMBER 46
The National Bipartisan Commission on the Future of Medicare sounded like a good idea. Seventeen Commission members met for the first time in March of last year, and were scheduled to make a truly bipartisan recommendation on how to “save” the Medicare program by March of this year. On March 16, 1999, the Commission held its final meeting, and failed to make any recommendations at all.
The idea of a bipartisan approach to Medicare reform was written into the Balanced Budget Act of 1997. Its seventeen members included five U.S. Senators, four members of the House of Representatives, and a collection of doctors, nurses, health insurance industry leaders, lawyers and businesspersons. The final proposal was based on a concept of “premium support”–an idea that would require private providers and the existing Medicare program to bid for Medicare dollars, and guarantee Medicare recipients only so much coverage as the average bid would provide.
Although the final Commission report was not adopted, a majority of the Commission supported the premium support idea. Because Congress wanted to ensure that any recommendation was truly bipartisan, the Commission’s rules required eleven votes to adopt any proposal. Ten members supported the final report, so the idea of premium support might be expected to resurface in future Congressional actions. As Commission member Dr. Bruce Vladeck says: “In Washington, D.C., no bad idea ever truly dies.”
Critics of the premium support approach to Medicare reform sharply questioned projections of substantial savings from the proposed change to Medicare. Most economists challenged the assumptions on which the savings were based, and the Health Care Financing Administration (the government agency in charge of Medicare and Medicaid) estimated that the Commission’s approach would save no more than 2.5% of the future cost of Medicare–far short of what will be needed to avoid huge predicted shortfalls early in the next century.
Huge (and unanticipated) budget surpluses in the last two years have led some to question whether Medicare reform is such a pressing need. Nonetheless, the evidence indicates that legitimate concerns about Medicare’s future arise from expected demographic and financial changes, including:
|•||Medicare’s Part A fund (which pays for beneficiaries’ hospitalization costs) is projected to “go broke” in 2008.|
|•||Annual Medicare spending, now at just over $200 billion, will rise to between $2 and $3 trillion by 2030.|
|•||Medicare beneficiaries are now paying just under one-third of the cost of their medical care. In 1995, that amounted to an annual average of $2,563 per beneficiary. That figure is expected to rise dramatically over the next few decades, and to rise more quickly than increases in the general cost of living. Incidentally, private employers and so-called “Medigap” insurance policies are currently paying about one-tenth of the beneficiaries’ share.|
|•||77 million “Baby Boomers” (those born between 1946 and 1964) will begin to qualify for Medicare in 2011. The total number of Medicare recipients will double, to over 80 million in 2040.|
|•||If no other action is taken, the Medicare payroll tax will have to increase from its current 2.9% to 5.6% by 2030.|