How the Debt Super Committee Can Fix Medicare
Now that the 12-member Joint Select Committee on Deficit Reduction (a.k.a. the debt "super committee") has met for the first time, the debates will begin on how to reduce our national debt. Changes to Medicare are on the table, so let's see what options the debt super committee has to contain the rising costs of Medicare.
Medicare is a medical insurance program for retirees age 65 and over, and for individuals of any age who have been entitled to receive Social Security's disability benefits for 24 months. Medicare is administered by the federal government and is funded by FICA taxes on workers and their employers, premiums charged to retirees, and general federal revenues.
Here are nine possible ways to contain or reduce Medicare's costs:
- Increase premiums paid by retirees.
- Restrict eligibility by increasing the retirement age or reducing coverage for people on disability.
- Increase cost sharing with participants through higher deductibles or co-payments.
- Encourage participants to be healthier, so they don't need as much medical care.
- Provide incentives to participants to use more efficient medical care providers.
- Reduce payments to medical care providers.
- Reduce or eliminate fraud and waste.
- Reform malpractice laws to reduce costs for medical providers.
- Allow Medicare to negotiate prices of prescription drugs with drug companies.
I don't think the federal government should increase the premiums charged to retirees. Monthly premiums for Medicare are currently $115.40 for new retirees, plus an additional $30 to $40 each month to buy optional Part D prescription drug coverage. Premiums are means-tested, so that higher income participants incur premium surcharges, paying anywhere from $161.50 to $369.10 per month for the basic coverage, plus additional surcharges for Part D prescription drug coverage. Increasing premiums would create hardships for lower-income beneficiaries, and higher income beneficiaries already pay higher costs.
Increasing the retirement age would also create hardships for older citizens, leaving many with no medical insurance. And the vast majority of people who have been receiving Social Security disability payments for 24 months are seriously disabled and are often unable to obtain any other medical insurance. Eliminating their Medicare benefits would truly be a hardship.
Almost all of the remaining ways listed above to reduce Medicare's costs were included in a report issued late last year by the bi-partisan National Commission on Fiscal Responsibility and Reform (otherwise known as the deficit commission). This report is a great place for the debt super committee to find ways to contain costs. It represents a thoughtful, bi-partisan effort to contain Medicare spending and balance the needs of citizens and taxpayers.
Also note that Health Care Reform includes provisions that will reduce Medicare spending, including developing more efficient delivery of health care, reducing fraud and waste, and encouraging citizens to improve their health.
If you aren't satisfied with these suggestions, then you'll need to consider more radical changes.
Next: More Radical Changes
More Radical Changes to Medicare
The fact is, our collective behavior is responsible for much of the high costs of Medicare. As a nation, we're overweight, we eat too many unhealthy foods, and we don't get enough exercise. If our leaders got really serious about containing Medicare's costs, they'd consider more radical changes:
- Additional taxes on alcohol, cigarettes, and processed foods that have high fat, sodium, and/or sugar content. Then use these taxes to help pay for Medicare. After all, a substantial amount of research shows that consumption of these unhealthy foods is adding to Medicare's costs.
- Premium discounts if you don't smoke and keep your body-mass index within healthy ranges. After all, Medicare is a form of insurance, and with other types of insurance such as car insurance and life insurance, you're eligible for premium discounts for good driving behavior or healthy lifestyle choices. Some employers are already experimenting with similar risk-based premiums for their employee health plans.
If we don't like the ideas described in this post, then we need to accept paying higher taxes for the collective good of keeping our older citizens alive and healthy. We can't stubbornly insist on containing or reducing taxes while paying for a valuable benefit such as Medicare. I support the deficit commission's recommendations -- while they're tough choices, they'll help us contain costs while still providing a lifeline to our senior citizens.
More on MoneyWatch:
- Debt Deal: What Changes Are in Store for Medicare?
- 8 Essential Steps for Enrolling in Medicare
- Debt Deal: What Changes Are in Store for Social Security?
- How the Debt Super Committee Can Fix Social Security
- How to Fix Social Security's Financing Problems
