Back to Work - Bill Clinton [27]
If Medicare continues to increase at the projected rate of inflation for the next ten years, costs in excess of the Medicare payroll tax will add $625 billion to the debt. Medicare spending as a percentage of GDP is expected to rise from 3.8 percent in 2011 to between 4.1 and 4.3 percent by 2021. The costs of Medicaid and other federally funded health programs are also projected to rise faster than inflation and increase their percentage of GDP. However, if the government’s health cost increases could be kept to the overall rate of inflation, the health programs’ cost would be hundreds of billions of dollars less than estimated, reducing the amount of benefit cuts or tax increases necessary to balance the budget.
How could we do that?
Medicare, like Social Security, is financed by a payroll tax, 1.45 percent. While most experts think a pension system like Social Security should be financially sound for seventy-five years, the general view is that Medicare would be sound if the fund’s projected solvency is eighteen years.
When I took office in 1993, the Medicare fund was scheduled to run out of money in 1999. When I left office in January 2001, its solvency had been extended to 2025, mostly through doing a host of little things to reduce health-care inflation under the direction of Secretary of Health and Human Services Donna Shalala.
The last two serious efforts to rein in Medicare costs produced greater savings than budget authorities estimated. Both the reform legislation signed by President Reagan and the savings package I signed in 1997 produced double the projected savings. Both bills received strong bipartisan support, and afterward there was virtually no public outcry that Medicare had been “cut.”
What, if any, relevance do these previous efforts have to the current Medicare debate? After another decade of health costs going up at three times the rate of inflation, plus the cost of the senior drug benefit, with the retirement of the baby boomers looming, the size of the problem is bigger. Also, the easiest savings option—cutting the reimbursement rates to Medicare Advantage providers—has already been taken, with the money going to close the doughnut hole in the senior drug program and to add a few years to the viability of the Medicare fund.
Nevertheless, because we have learned so much in the last few years about how to both reduce health-care costs and improve care, there are still lots of opportunities to save money in Medicare without cutting benefits and burdening seniors who aren’t wealthy. It won’t be easy, in part because changing the way health care is delivered and financed is hard to “score” in terms of budget savings. But this is by far the best way to reduce the projected cost increases, because changing the delivery and finance system will bring down the overall cost of health care, not just the cost of government-funded programs. That would help all Americans, making businesses more competitive and freeing up money for them to invest in pay raises and new growth.
Easy scoring is the surface appeal of the plan passed by the House Republicans. It would simply give Medicare beneficiaries a voucher and let them “shop” for a private plan that best meets their needs. The government can calculate exactly how much that would cost and how much it would save compared with the projected future costs of the present system. Those who oppose the plan, including me, think it’s a massive shift of costs onto seniors, because the voucher will require them to spend $6,000 or more out of pocket to keep the coverage they now receive, and it