If you are one of the 45 million people currently eligible for Medicare or one of 77 million "baby boomers" who will start eligibility in 2011, you had better call on Congress for prompt action. If you are a taxpayer, join in the call if you want to avoid paying for staggering Medicare debt. Inaction could lead to major catastrophes.
Today, 6.9 percent of federal taxes go for Medicare and Social Security. By 2030, according to Dr. Thomas Saving, who is a public trustee of the Medicare and Social Services trust funds, this could be 50 percent (with 37.5 percent required for Medicare).
By 2015, 3.5 million jobs could be lost through the impact of funding Medicare. Economist Laurence Kotlikoff estimates that payroll and income taxes would have to rise to 40 percent of salaries just to cover Medicare expenses.
He also estimates that our standard of living could drop by 25 percent by 2030 if taxes are raised to cover the promised benefits. The long-term Medicare debt could reach a staggering $32.4 trillion over the next 75 years.
Another startling and frightening statistic: Today there are about four workers for every Medicare beneficiary. By 2030, there will only be 2.4 workers for each beneficiary. From every point of view, these are major problems for our country that call out for action. Lacking action, the problem gets worse every year.
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Unfortunately, Congress has failed to act on this widely acknowledged problem. Year after year, Congress has failed to act on important proposals because of fear of voter (especially seniors) retribution. Like so many fiscal crises, it seems Congress is satisfied to defer real attempts at solution to future elected officials.
In fact, the current health care bills promoted by the president and Democrats in Congress not only continue to ignore the problems but also assault Medicare. Let’s look at some of the ways the congressional health care reform bill assaults Medicare.
First, there is the critical matter of cutting Medicare Advantage plans held by many seniors. Why would we reduce choice and limit competition in a time when we need the positive forces of competition?
Next, there are the proposals to cut $170 billion from Medicare. On the surface, how can we cut a program that is already grossly underfunded?
At one point, there was a proposal to lower the age of Medicare eligibility. So we would add costs to a program already going broke? Remarkable! Thankfully, that idea seems to have been abandoned.
Then there is the matter of reducing fraud and abuse. Who wouldn’t want to do this? Of course, one has to wonder why, if this was possible, this hasn’t been done long ago. What is even more remarkable is that any savings projected would be applied to a massive health care reform initiative rather than being applied to reduce the Medicare deficit. Is this a matter of grand theft?
Another sad fact is that Medicare payments have been politicized. It seems that inefficiency is being rewarded and efficiency/high quality is penalized. Rate disparities have long existed and Congress has failed to make reforms. We feel much of the negative impact in our own back yard, with Mayo Medicare payments often being below costs. Although there have been token efforts to include payment reform in congressional health care reform, it remains to be seen what will actually happen.
Frankly, the Medicare dilemma should be addressed before we embark on massive private market transformation. Medicare (and Medicaid) need major fixing and can be a laboratory for system reforms. We have a responsibility to current and future seniors to provide a stable financial base for these important programs. We certainly cannot afford to make the situation worse, as is being proposed in current health care congressional reform bills.
