Keep benefits intact
Reduce benefits to a level we can sustain
Put individuals in charge of their own health care
When Medicare was created, it amounted to a promise that whatever health care retired individuals need will be covered at public expense. That promise must be honored, even if it means raising taxes or reducing spending in other areas. As things stand, elderly persons are paying more than ever for out-of-pocket medical expenses that are not covered by Medicare. Minor adjustments can be made to reduce the program's cost, and aggressive measures should be taken to reduce fraudulent claims. But it is immoral and unthinkable to reduce medical benefits or deprive elderly persons of the freedom to choose their own physicians.
Unless we revisit what Medicare promised, and cut back certain benefits, Medicare's trust fund will be depleted within a few years. When this program was created in the 1960s, no one anticipated that so many expensive medical technologies would be developed or that the cost of this program would escalate at 10 percent or more per year. Before the baby boomers retire, we need to pare down benefits, revise the eligibility rules, and make affluent retirees pay more of their own health care costs. To ensure that the needs of future generations are met, commitments to the elderly need to be trimmed to a level we can afford.
Health care spending for older Americans will continue to rise as long as the current Medicare system is in place. The flaw in the current system is that individuals use Medicare indiscriminately since most costs are paid by the government. We would be better off, as a nation and as individuals, if Medicare for older Americans was replaced by mandatory medical savings accounts. In retirement, people would use these accounts to pay routine medical bills and premiums on high-deductible medical insurance. If individuals pay directly for their health care, it will help to keep costs down.
Keep benefits intact
Reduce benefits to a level we can sustain
Put individuals in charge of their own health care
What should be done?
Keep the current structure of Medicare intact. Only minor modifications are needed. Take new measures to detect fraudulent and excessive claims, from individuals as well as health care providers. Ensure that full Medicare benefits are provided to upper-income retirees, just like everyone else who pays into the system. No one should be forced to pay more for out-of-pocket health care costs. Oppose changes that may lead physicians to cut corners on medical care provided to retirees. Make sure physicians in HMOs who treat Medicare patients don't stint on care to keep costs down. Redefine coverage so Medicare covers a full array of preventive measures, such as screening for breast and prostate cancer, which should lead to savings in the long run.
To reduce costs, restrict the procedures Medicare covers, especially high-cost procedures for older retirees, such as kidney transplants. Require retirees to get their health care through HMOs, which have a proven record of reducing costs. Accelerate the schedule for raising the eligibility age for Medicare to 67, and consider raising it to 70. Retirees who can afford to pay a larger portion of their health care should be required to do so. This applies particularly to Medicare Part B, which is paid out of general revenues. Place strict limits on home health care, one of the main reasons for the soaring cost of Medicare. Medicare recipients should pay higher deductibles to convince people to think twice about whether they really need certain medical procedures.
Replace Medicare with a system of medical savings accounts for the retirement years, similar to the tax-deferred retirement accounts that millions of Americans already manage for themselves. Require individuals and employers to contribute each month to medical savings accounts, rather than paying Medicare taxes. Provide means-tested government health care programs like Medicaid to individuals who are unable to help themselves. Encourage or require retirees to pay for routine medical expenses out of their medical savings accounts, just as they pay directly for other routine expenses. To cover the cost of unexpected and often expensive medical procedures, encourage or require retirees to use their medical savings accounts to buy high-deductible insurance policies. Used in this way, private insurance would provide protection against potentially ruinous expenses.
Arguments For This Approach
Medicare is not in dire straits. All that's necessary are minor adjustments, and more agressive measures to detect fraudulent claims. Medicare is a right and a promise. Everyone who has paid into Medicare, regardless of their income, deserves to have their health care costs covered in retirement as a public expense. Providing for individuals who can no longer provide for themselves is one of the fundamental responsibilities of government. As a society, we respond to the needs of elderly persons because we recognize in them a vulnerability that most of us will eventually share. Older Americans need the benefits provided by Medicare. Even though many have only modest incomes, retirees are paying a lot in out-of-pocket medical expenses. Retirees need Medicare benefits more than ever since they are living longer and the cost of health care is often staggeringly high.
Over the long term, the federal budget cannot be controlled without restraining spending for Medicare, the fastest growing major program in the federal budget. The only realistic way to sustain Medicare is to substantially change the program, cutting back some benefits and imposing restrictions on how retirees get their health care. People will continue to overuse expensive medical services unless they bear more of the cost through higher deductables. The existing Medicare system provides generous benefits to millions of well-heeled retirees who don't need public subsidies. There's no reason to encourage people to retire at age 65 by offering full Medicare benefits. Most people in their mid- to late-60s are healthy and able to work for at least a few more years. Medicare costs have increased far more rapidly than private sector health care costs, largely because Medicare doesn't require people to use HMOs. If we don't take serious measures to contain the cost of Medicare, the soaring cost of providing health care to the elderly will force us to cut back on other essential public programs.
No matter what changes are made in Medicare benefits or eligibility criteria, health care spending for older Americans will continue to rise as long as the current system is in place. This replaces a fatally flawed system that encourages retirees to use Medicare indiscriminately, since most costs are paid by the government. Under this system, individuals who pay for their own health care have an incentive to shop around. Government's role in providing health care for retirees should be limited to assisting individuals who are unable to help themselves. This approach reflects America's traditional emphasis on personal responsibility and limited government. Under this system, retirees would have real security because they won't have to worry that the Medicare system may not be able to meet its commitments. People would know what to expect in old age, and could retire whenever they choose.
Arguments Against This Approach
Medicare needs a lot more than just minor adjustments. Unless benefits are reduced, taxes raised, or program costs cut, this program cannot be sustained for more than a few years. Medicare could go broke as early as 2010. Retirees are the only group in America with universal health insurance. Why should America's elderly get Cadillac coverage while 40 million Americans have no health insurance at all? While an increasing percentage of working-age Americans use HMOs, which have a proven record as cost-cutters, most Medicare recipients get expensive fee-for-service care. Unless limits are placed on Medicare coverage, new medical procedures and a growing number of retirees will drive the costs of this program even higher. It's not right to cut corners on other public obligations to cover the cost of health care for elderly Americans.
Health care is uniquely important and isn't an area in which we should cut corners. If doctors can help elderly patients with a certain procedure, Medicare should provide funds to make it possible. The average elderly person pays almost $900 a year in out-of-pocket costs for medical care that is covered by Medicare. It's unacceptable to ask them to pay more. Medicare was supposed to protect retirees from financial insecurity in old age. Linking benefits to retirees' income will undermine support for Medicare, which is popular because it is universal. Furthermore, it punishes those who have worked hard and been financially prudent. Requiring retirees to use HMOs may result in inadequate medical care for older Americans. It takes away people's freedom to choose their own physician. Most people plan throughout their working life on retiring at a certain age. We shouldn't change the rules by raising the age at which people qualify for Medicare benefits. As long as retirees have a Medicare credit card that pays for their health care -- at a low personal cost -- the cost of health care for the elderly will continue to soar. Our system of providing for the health care of the elderly needs to be fundamentally changed.
Ensuring that elderly persons get good health care is a public responsibility, an expression of collective concern for older Americans. This is the premise of Medicare and Social Security, two programs that have served the country well and vastly improved the situation of retirees. Because of mismanagement of funds or bad investments, many retirees would end up with far less than they need to cover their health care needs. Under a self-financed requirement system, lower-income retirees would suffer. Elderly people who worry about how much is left in their medical savings accounts are likely to play Russian roulette with their health, deferring care they urgently need. There's no practical way to make the transition from Medicare to a system in which all working Americans have personal medical savings accounts.
Keep benefits intact
Reduce benefits to a level we can sustain
Put individuals in charge of their own health care
Q: What is likely cost or tradeoff of each course of action?
A:
Honoring the promise we made to cover health care needs of retirees at
public expense may mean raising taxes, or reducing government spending
in other areas.
A:
Trimming benefits, revising eligibility rules, and requiring the
affluent elderly to pay more of their own health care costs will mean
that retirees have to adjust to reduced benefits; they will have to
work a year or two longer before qualifying for retirement benefits;
and some will have to pay a larger portion of their own medical costs.
A:
Individuals will have to manage their own personal medical savings
account, and they will have to pay directly for the cost of health care
in retirement, either out of pocket, or from high deductible health
insurance policies. Since retirement accounts will be invested in
private funds, the value of the account will go up and down depending
on the market.
Q: How serious are Medicare's problems, and how substantial a change do we need to fix it?
A:
Medicare isn't in dire straits, and radical changes aren't necessary.
If the nation maintains a healthy rate of economic growth, the
additional tax revenues will go a long way toward paying for the rising
cost of Medicare.
A:
We won't be able to sustain Medicare with modest changes such as
reducing fraudulent claims and encouraging more retirees to use HMOs.
Benefits must be reduced and the age of eligibility raised to keep the
program's costs in check.
A:
The current Medicare system, which amounts to a charge card for which
individuals don't receive the bill, is fundamentally flawed. What's
needed is radical change: replacing Medicare with a system in which
individuals have personal medical savings accounts to pay for their own
health care in retirement.
Q: What's the main thing we have to fear with regard to health care coverage for the elderly?
A:
We have to recognize that government has a special responsibility to
older Americans who are no longer in a position to work and earn a
living. Many older Americans are already struggling economically. It
would be immoral and unconscionable to cut back Medicare benefits.
A:
We have a responsibility to future generations as well as current
retirees. For that reason, we have to adjust Medicare benefits and
eligibility criteria so benefits can be sustained. If current trends
continue, we'll be forced to cut back other essential government
programs to afford the soaring cost of health care for retirees.
A:
The thing we have to fear is that Medicare is fundamentally flawed, and
yet elected officials are trying to fix it with Band-Aids. Young people
are losing confidence in government and the future. They're convinced
that our system of retirement benefits -- both Medicare and Social
Security -- is comparable to a pyramid scheme. By the time young people
retire, these programs won't provide anything close to the benefits
current retirees get.
Talk It Over