Writing Medicare’s Prescription

February 3, 2012
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By Douglas E. Schoen


THE REPUBLICAN PRIMARY in Florida brought discussions of healthcare,

particularly Medicare, back to the forefront of the national discourse. With its

sizeable senior population,  Medicare  and Social Security were top of mind to

Florida voters.


It is certainly important that health care, and particularly Medicare, be

debated thoroughly during the Presidential campaign, as entitlement reform is

one of the most pressing issues that Congress and the White House will face next

year. Indeed, the latest  annual Medicare and Social Security Trustees report

projected that the Medicare trust fund will run out in 2024 – five years earlier

than previously expected – and the Social Security trust fund will run out by



The good news is the emerging national consensus,  across the ideological

spectrum, that we must address the nation’s budget problems and that Medicare

reform must be a part of any agreement. It’s essential, though, that changes to

the Medicare program be made responsibly, starting with the principle  that

reform must protect the elements of the program that are working efficiently



One Medicare program that should be kept intact is Part D, the prescription drug

benefit program. Part D is the most cost-effective and successful entitlement

program the federal government runs. Even Newt Gingrich, presenting himself on

the campaign trail as the champion of conservative voters, has spoken up several

times  in support of Part D. He has touted the market-based program’s success

and effectiveness in saving lives, saving money and offering people more



Thanks to competition among insurers, the prescription drug program costs the

government and beneficiaries far less than initially projected. Last year, the

The Spirit of Shrewsbury

Congressional Budget Office (CBO) reduced its baseline 10-year spending

projection for all of Medicare by $186 billion, two-thirds of which is accounted

for by a reduction in Part D spending.


While Medicare Part D is an example of a Medicare program that works, it is

clear that not all Medicare policies and programs are as useful and valuable.


The Independent Payment Advisory Board (IPAB) that was created with the passage

of President Obama’s health care law is one such provision that should be

eliminated. IPAB would allow an unelected and unaccountable board to make

program cuts to meet spending targets.


Proponents of the board have argued that IPAB will improve the quality of care

as a result of the cost-cutting measures it enacts. In fact, IPAB is a threat to

critical medical treatments and services for all Medicare beneficiaries. The

cuts it imposes will only reinforce systemic problems, not fix them, and create

unsustainable savings.


Major changes in the Medicare program should not be decided by bureaucratic fiat

in a process lacking transparency and oversight. Rather, they should be debated

and decided by elected officials who will be held be accountable for their

decisions. Everyone knows that tough choices lie ahead. It’s up to our political

leaders to explain that reforms are essential to make Medicare secure for future

generations of seniors.


There are many possible ways to reduce Medicare spending.  A broad reform debate

will enable people to better understand the tradeoffs involved.


To make sure program benefits remain available for those who need them most,

lawmakers should consider eligibility requirements and need-based benefits. By

raising the eligibility age for Medicare to 67 from 65, for example, $124

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billion would be saved.


The bipartisan Simpson-Bowles commission has proposed gradually limiting the

Medicare benefits the wealthy receive. Last fall, President Obama proposed

higher Medicare premiums for high-income seniors as part of the deficit

reduction plan that he submitted to the Congressional “supercommittee.”  Obama’s

plan would save about $20 billion over 10 years in Medicare.


Increasing premiums beneficiaries pay for Medicare doctors’ coverage to 35

percent of  program costs from the current 25 percent could save $241 billion.

Modernizing Medicare’s benefit package to include copayments, deductibles and an

out-of-pocket maximum could save about $14 billion through 2018. A cutback in

subsidies for “Medigap” supplemental insurance would save $92 billion.


A still-bolder proposal going beyond Medicare itself would be to remove the

distortion in the tax code that keeps health insurance tied to employment. The

tax write-off for employer-provided health care benefits is the single largest

tax expenditure. It is estimated to cost the government more than $1 trillion

over the next five years. Capping the tax exclusion in 2018 and then phasing it

out over 10 years would result in massive savings that could be devoted to

shoring up Medicare and other programs for seniors.


The American people are ready to accept some difficult choices as part of a

comprehensive deficit reduction program. It is time for Congress to begin the



Douglas Schoen is a political strategist and author of “Mad as Hell: How the Tea Party Movement is Fundamentally Remaking Our Two-Party System” (Harper 2010), co-authored with Scott Rasmussen






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