Democrats Cower at the 800 Pound Gorilla: Medicare

Democrats Cower at the 800 Pound Gorilla: Medicare


On Memorial Day, Americans celebrated the fallen heroes of past and present wars, and rightly so. We honored the bravery of those who put their lives on the line to protect our country. That commitment and sacrifice paints in sharp relief the cowardice of those in Congress who will not risk even slight political bruising for the good of their country. Senate Democrats, who know full well that our country’s prosperity demands entitlements reform but refuse to engage on the topic – and who will not propose a budget although that is their job -- should be deeply, deeply ashamed.

There is not a single politician in this country who doubts the need for changes in Medicare. Every group forecasting the looming disaster that is our healthcare system has targeted Medicare for substantial reductions. Most of the “reform” included in President Obama’s health-care bill – a bill that notably did not lower health-care expenditures -- involved taking money from Medicare (more than $500 billion through 2019) to fund an expanded safety net. Only a few brave souls, in particular Rep. Paul Ryan, R-Wisc., have attempted to re-order the massive program, providing a framework for Medicare’s survival.  For that, he – and his proposals -- are now politically toxic.

Americans are not stupid. True, they want Medicare to be there for them. They also know that its future is in doubt. Republicans need to drive this point home. As Sen. Chuck Schumer, D-N.Y., derides the GOP for wanting to “end Medicare as we know it,” his opponents should make it clear that under all scenarios Medicare “as we know it” is a goner.

A recent story in The New York Times describes a new, unprecedented effort by the Obama administration to punish and reward hospitals based on how much they spend per patient. Tracking how much is spent before, during and after a patient’s treatment is part of Obama's health bill to improve “the quality and efficiency of healthcare.” This “value-based” assessment will determine how much money flows to various hospitals.

Imagine for a moment how this will work. A patient is admitted to Hospital A, whose per-patient spending looks a bit high. Hospital A begins to cut back on tests or procedures, anxious about reductions to its revenue and hoping to improve its standing. Care will be determined not by patient A’s needs, but by some matrix of median outlays assembled by Microsoft. What’s the impact on the patient? Just imagine.

Is this a good idea? Maybe, but it makes crystal clear that ultimately Medicare spending per patient will be limited either by 1) fiat, 2) administrative interference that could include rationing, disguised as benchmarking or 3) income testing. The irony is, of course, that Ryan’s approach would almost certainly allow for means testing down the road – something liberals would presumably embrace. If seniors are given vouchers, won’t they inevitably one day vary with income? Will Social Security eventually embrace the same approach?

Ryan’s Medicare proposals should be viewed as a starting point. It is a responsible effort to address the biggest hole in the country’s budget -- $452 billion, or some 14 percent of the fiscal 2010 budget went to Medicare.  The GOP needs to hammer home the message that the country is spending too much money – and Republicans are the only ones trying to come up with solutions. On spending cuts - President Obama and the Democrats in Congress have completely whiffed.

Spending cuts are not just about lowering the deficit. They also aim to cap the country’s accumulated debt. Medicare isn’t the only looming threat to our country; rising debt is equally frightening. Thanks to an accommodative Federal Reserve, the country has not yet had to pay the price that feckless borrowers inevitably face – soaring interest costs. The Fed’s policies have kept interest rates low, but without a doubt this will change. Rising rates and higher interest outlays will smother economic gains unless our debt level starts to fall. 

Researchers at International Strategy & Investment estimate that interest costs, which will amount to approximately $225 billion in 2011, will more than double to $507 billion in 2015, climbing from 14.8 percent to 17.4 percent of GDP. They predict that “interest costs will continue to far outpace the growth of other spending as a trillion dollars or more would be added to the debt each year and the major entitlements programs…will continue to claim larger shares of GDP.”

The non-partisan Congressional Budget Office, in its most recent projections, says that net interest costs will jump from $225 billion in fiscal 2011 to $751 billion in 2020 – an increase of $526 billion.  That’s more than the projected rise in either Social Security ($469 billion) or Medicare ($377 billion) over the same period. Debt does matter.

Our budget issues are not going to disappear just because they are politically difficult.   They are not simple, and the solutions may make some unhappy. However, Americans expect our leaders to put forward proposals, stand up and be counted, and possibly put themselves at risk. While we celebrate the bravery of our young men and women facing the enemy in Afghanistan, let us make it clear to those serving in Congress that we expect nothing less from them.

Related Links:
Reining in Medicare, Medicaid (Times Record)
Hospitals Annoyed by Medicare Performance Payment Plan (National Journal)
Save Medicare Now, or Go Under Later (