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Medicare News
Senior Citizens' Medicare Bill Could Quadruple by
2020 as Boomers Join, Says Medicare Trustee
Restrictions on health care spending can reduce
Medicare debt up to 40, says study for private enterprise
think tank
 June
13, 2007 - Medicare's costs are rising so rapidly that substantial tax
increases, benefit cuts, or a combination of the two will be necessary,
says a Medicare trustee in a study published by a non-profit group that
advocates entrepreneurial private sector alternatives to government
regulation and control. If senior citizens bear the burden, monthly
premiums in constant dollars would have to more than quadruple by 2020.
"As more and more baby boomers reach retirement,
the cash-flow deficits will begin to snow ball," said Thomas R. Saving,
a Medicare trustee who is a senior fellow with the National Center for
Policy Analysis and director of the Private Enterprise Research Center
at Texas A&M University.
"What is Congress going to do when Medicare deficit
mount?"
In a new NCPA study (http://www.ncpa.org/pub/st/st299),
Saving notes that Medicare has an unfunded liability six times the size
of Social Security and is on a spending path that is unsustainable. What
can be done?
Some have suggested either making senior citizens
pay more for their benefits or raising taxes. Yet according to the
study, these options would not directly reduce health care spending
growth; rather they would only result in a painful reallocation of the
program's costs between taxpayers and seniors. For example, in order to
fund future deficits:
● If senior citizens bear the burden: Monthly
premiums in constant dollars would have to more than quadruple by 2020,
and be almost 30 times their current level by 2080. At that point, the
required monthly premium would consume more than the average
wager-earner's Social Security check.
● If taxpayers bear the burden: We would need a
10 percent increase in income taxes by 2020 and a 50 percent increase by
2080 -- just to pay Medicare's bills.
"Serious reforms should be designed to slow the
growth of health care spending," said Saving. "Someone must choose
between health care and other uses of money. Someone must decide that
the next MRI scan or the next knee replacement, for example, is worth
the cost."
Health spending decisions could be made by the
government (as it is in other countries), by insurers operating under
government rationing rules, or by seniors themselves. The study examined
the consequences of both government and seniors making the decisions,
and found the impact on the deficit to be roughly equal.
● One option: upon reaching age 65, beneficiaries
would enroll in a health plan that is indexed only for inflation, rather
than increases in health care costs. Although this option would deny
many seniors access to new technology, it would reduce Medicare's
unfunded liability up to 40 percent.
● A second option: a $5,000 deductible indexed to
inflation coupled with a Health Savings Account (HSA). This reform
would encourage seniors to make their own choices between health care
and other spending; it would reduce Medicare's unfunded liability by as
much as 40 percent.
"Rationing of some kind, through spending limits or
greater cost sharing will be necessary, but even with an aggressive
program it will not be enough because the numbers of beneficiaries and
health care costs are growing so fast," said Saving.
"Ultimately, we must move to a system in which each
generation pays some or all of its own way by saving for its own
retirement health care needs."
>> NCPA study in pdf (http://www.ncpa.org/pub/st/st299)
About The National Center for Policy Analysis
NCPA is a nonprofit, nonpartisan public policy
research organization, with offices in Dallas and Washington, D.C.,
established in 1983. The NCPA's goal is to develop and promote private
alternatives to government regulation and control, solving problems by
relying on the strength of the competitive, entrepreneurial private
sector. Topics include reforms in health care, taxes, Social Security,
welfare, criminal justice, education and environmental regulation. NCPA
depends on the contributions of individuals, corporations and
foundations that share their mission. The NCPA accepts no government
grants.
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