Tough Choices: Cutting Medicare's Rising Costs

Barbara Hayes relies on Medicare to help her pay for colon cancer treatments. From the CBS Evening News, Dec. 1, 2010.
With so much at stake, over the days and weeks ahead the CBS Evening News will be taking a closer look at the Tough Choicesthe country will be facing to reduce the debt and deficit. (Scroll down to vote your opinion on the issue)

Two big programs that can't be allowed to fail are Medicare and Social Security -- but they and other entitlements are targeted by the deficit commission.

CBS News correspondent Ben Tracy reports the programs account for more than six out of every $10 the government spends. Social Security makes up 20 percent of the total budget, Medicare 13 percent.

That health insurance program for Americans 65 and over is extremely popular but very expensive. That too will mean tough choices.

The Challenge:
The challenge for Medicare is to keep the program alive while also keeping aging patients alive. Forty-seven million Americans are on Medicare, at a cost of $468 billion.

CBS Evening News Series: "Tough Choices"

Barbara Hayes is on Medicare and is dying of colon cancer. "I could have six days, I could have six months," she says. "I don't know."

For her recent chemotherapy, Medicare was billed $155,000.

"If I didn't have Medicare I'd be up the creek," says Hayes.

Medicare is up a creek. In the next 10 years as baby boomers age, 14 million more seniors will pour into the program. By 2020 Medicare spending is expected to be $1 trillion, two-thirds of today's federal budget deficit.

"Essentially Medicare is the primary driver of all the fiscal problems we face in this United States," says USC Schaeffer Center for Health Policy and Economics professor Dana Goldman.

The Choices:
The deficit panel offers some tough choices. First, people on Medicare will likely have to pay more. Right now, about 90 percent of beneficiaries pay virtually nothing for Medicare services. Under the panel's proposal everyone would pay at least a $500 deductible and up to $1650 in out-of-pocket expenses each year.

"In this case by asking people to pay more they will end up using less and that will reduce the total spending in the Medicare program," says Goldman.

Secondly, Medicare will no longer reimburse doctors and hospitals for patients who don't pay their out-of-pocket expenses. Health care providers will either have to go after the patient or eat the cost.

Accepting these two choices would save an estimated $133 billion by 2020, 9 percent of today's deficit.