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Re-Opening the Conversation about Medicare

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Suzanne Discenza
May 23, 2017

In terms of health policy discussions, there seems to be a “gorilla in the room” concerning how to handle the ever-closer looming insolvency of the Medicare system. Indeed, even with the current Republican agenda in Congress to replace the Affordable Care Act (ACA) with the American Health Care Act (AHCA), little has been publicly discussed about the future implications of such passage for Medicare, the “entitlement” program providing basic health care coverage for all American citizens reaching the age of 65 years of age, the permanently disabled and some other groups. An article in Newsweek.com on March 7, 2017, declared “Medicare is not part of [AHCA] legislation at the moment,” although it did note the affluent would no longer be subject to a higher Medicare tax. A briefing by the Kaiser Family Foundation on March 14, 2017, reported the AHCA would leave most ACA changes to the Medicare program intact, including “benefit improvements (no-cost preventive services and closing the Part D coverage gap).”

Yet even as early as December 6, 2016, Forbes.com warned, “tearing apart Obamacare will almost certainly raise costs for Medicare beneficiaries and hasten its decline as a guaranteed, fee-for-service system.” An article in Bloomberg.com on March 17, 2017, reported the proposal from the House Budget Committee would have partially privatized Medicare, in which Medicare beneficiaries, starting in 2024, “would choose from a range of options, including traditional Medicare and private coverage, and “the government would issue fixed payments to the plan,” similar to a voucher system. Moreover, although virtually unpublicized beyond its own website, the aforementioned Kaiser Family Foundation briefing issued a more dire prediction concerning future implications for the Medicare program with passage of the AHCA:

Repealing this surtax would reduce revenue to the Medicare Hospital Insurance (Part A) trust fund by $117 billion between 2017 and 2026, according to the Joint Committee on Taxation. It would also weaken Medicare’s financial status by depleting the Part A trust fund three years sooner than under current law, moving up the projected insolvency date from 2028 to 2025, based on estimates by Medicare’s actuaries.

timePerhaps one question that should be asked in order to re-open a frank and honest discussion regarding “what to do about Medicare insolvency,” involves the reasons why this discussion is not happening to any large extent. One of the major reasons may be that the over-65 population, continuing to grow related to the ongoing influx of the Baby Boomer demographic, wields a huge influence over health policy decisions. It has been politically risky for politicians and policy makers to suggest outright cuts to the system, instead preferring to exact reduction in funding in a more incremental and less transparent manner. A column by Michael Hiltzik in the Los Angeles Times on February 1, 2017, refers to the use by politicians of “weasel words” and a “smokescreen of euphemism,” rather than “cuts,” in an attempt to not alienate their political base.

Whatever the reason for not addressing the pressing issue of Medicare solvency on behalf of older Americans who expect, and will depend on, Medicare to meet their health care needs through their retirement years, the gorilla remains in the room. There have been several other proposals to “shore up” the Plan, starting with the ACA that requires increased provider accountability for improved medical outcomes, bundled payments to providers for medical procedures and overall reduction in payments to health care providers and health insurance plans for Medicare services. These policies have met with varying degrees of pushback, as health plans have continued to exit from state health insurance exchanges and providers are increasingly refusing to take new Medicare patients related to what they feel are “unsustainably low” reimbursement rates.

Three alternatives often proposed by health policy analysts, but not yet adopted due to inherent inequities, have included increasing Medicare (payroll) taxes beyond the current rate of 2.9 percent of one’s modified gross adjusted income, requiring “means-testing” on one’s income to determine whether one actually needs Medicare or not, and indexing age of eligibility to an adjusted retirement age more in keeping with life expectancy, such as that already implemented with social security. Concerning the first, critics point to the over-burden on millions of working Americans in the lower income brackets whose wages have already not kept up with costs. The second is particularly unpopular with seniors at higher incomes who point to the fact they have been paying into the system all of their lives and would be unfairly penalized for their success. Finally, critics note indexing Medicare benefits to age favors the rich who live longer related to better access to medical care throughout their lives. If not any of these, then what?

It is time for all Americans to engage in an open discussion on the future of the Medicare program in the United States.  To continue to delay this discussion will only ensure insolvency.

Author: Suzanne Discenza currently serves as a lecturer in the School of Public Affairs at the University of Colorado Denver and as an adjunct professor in Public Administration and Healthcare Management at Park University.  Former Director of the MHA Program at Park, she also serves on the ASPA National Council and as Past Chair of the Health Policy Forum of AUPHA.

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