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March 28, 2008 Editorial Warnings that Medicare spending is growing at an unsustainable rate come with mind-numbing regularity, so it was no surprise that the latest report from the Medicare trustees found that the system is still headed for a financial abyss. Medicare's problems get scant attention on the campaign trail but will demand strong corrective action by the next president. The latest report by the trustees, all top officials of the Bush administration, contained the same bad news as last year's report. The trust fund that pays hospital bills is expected be exhausted by 2019, leaving Medicare to limp along with payroll tax collections that would cover only 78 percent of estimated hospital expenditures. And the trust funds that pay for doctors' services and prescription drugs will face rising costs that will inevitably drive up premiums and require infusions of money from general tax revenues. This year's report again warned that Medicare will soon be violating an absurd Congressional mandate that it can use general tax revenues — mostly generated by the progressive income tax — to pay only 45 percent of the program's total expenditures, and must rely on the payroll tax and payments by beneficiaries to cover the rest. We have criticized that foolishness before and can only hope that the next Congress eliminates the cap so that Medicare's financial troubles can be approached more sensibly. Meanwhile, the Bush Administration has proposed, as required, some steps to stay below the cap. Primarily, it wants to reduce government subsidies for drug coverage for individuals earning more than $82,000 a year, shifting those costs from the government to the beneficiaries. That seems reasonable given that wealthier people already pay more for their coverage of doctors' bills. As for broader Medicare reforms, the administration proposed severe cuts in the growth rate of Medicare payments to health care providers, with the biggest cuts imposed on hospitals. Congress wisely balked. Some cuts in provider payments are desirable and could be implemented without much harm. But the administration's cuts were too deep, and it refuses to consider reducing the unjustified subsidies granted to private health plans that participate in Medicare. Although political rhetoric often focuses on "runaway entitlement programs," it is important to recognize that Medicare's financial woes are not intrinsic to Medicare. The relentless rise in health care costs are driving up premiums for private health insurance and employer-based coverage as well. Medicare will not truly be "fixed" until those costs are brought under control. Letter to the Editor in Response April 1, 2008 Reining in Medicare: The Budget Director's View To the Editor: In your March 28 editorial "Medicare's Financial Woes," you describe the symptoms but offer no remedy. Medicare needs small adjustments now to prevent a drastic overhaul later. People can disagree with the specifics, but the president has proposed a responsible option that reflects common sense: Medicare should grow at a healthy 5 percent instead of growing at an unsustainable clip of 7.2 percent. The size of the president's proposal is slightly smaller than the bipartisan Medicare agreement from a decade ago — and this proposal will shave off nearly 30 percent of the $36 trillion unfunded obligation in Medicare over the next 75 years. I'd call that a smart start that's good for taxpayers, beneficiaries and the budget. You say that Congress "wisely balked" at the administration's specific proposals, but what did Congressional Democrats offer? So far, nothing. Doing nothing is irresponsible and unfair to future generations. Finally, your editorial suggests that health care inflation — not Medicare — is the real problem. But this ignores the fact the government is the largest purchaser of health care and that Medicare policies are a primary driver of health care inflation. Jim Nussle
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