Health Care Takes a Hit in New Commission Plan
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January 10, 2011

Well before we have any clarity on the impact of the election on health reform, the pundits are handicapping the prospects of efforts to make a serious dent in the national debt and deficit. Three national commissions are hammering out recommendations for reducing the debt and reining in entitlement spending, putting two giant health programs that serve the elderly, disabled and low-income Americans, Medicaid and Medicare, as well as Social Security, in the crosshairs of a new policy debate.

Just yesterday, the Administration's National Commission on Fiscal Responsibility and Reform, chaired by Erskine Bowles and Alan Simpson, released draft recommendations, with final recommendations due before the end of the year. Also yesterday, the Peterson-Pew Commission on Budget Reform issued a report recommending changes in budget process rules to help drive down the national debt. And next week, the Bipartisan Policy Center's Debt Reduction Task Force, chaired by Pete Domenici and Alice Rivlin, is expected to issue their recommendations.

All three groups are tackling very real challenges. The national debt has climbed to $13.7 trillion and the federal deficit has reached nearly $1.4 trillion. Spending on Social Security and mandatory health programs (Medicare, Medicaid and CHIP) account for about 40 percent of the federal budget, and according to CBO, will grow from roughly 10 percent of GDP today to 16 percent in twenty five years, due to the aging of the population and the rising costs of health care. With projections like these few openly support doing nothing, even though how much can actually get through the legislative process remains unclear.

The discussion of these issues is framed almost always in terms of "hard choices" to reduce spending, increase taxes, or both. On the spending side of the ledger, many say the hard choices won't be made because of political realities, including strong resistance from seniors to any changes to Medicare or Social Security. The mid-term election was just the most recent example illustrating the importance of senior voters. In general, Democrats will resist cuts in these programs and Republicans will resist any new taxes.

But these choices are also hard on legitimate policy grounds, especially when it comes to Medicare. And the most important reason they are hard is that so many seniors and disabled people on Medicare have low incomes and already pay a significant share of those incomes for their health care today. It will be difficult if not impossible to ask the majority of beneficiaries ––to pay more or make do with less. That has been the missing element in the entitlement/deficit reduction debate: Warren Buffet is not the typical Medicare beneficiary. Instead the prototype is an older woman with multiple chronic illnesses living on an income of less than $25,000 who spends more than 15 percent of her income on health care. It is the people on these programs and the realities of their lives that have been left out of the discussion.