Medicare is on a steady downward course to financial ruin and everyone should care. Its trustees admit that Medicare’s main trust fund could run out of money as early as 2017. Since the U.S. Treasury is under no obligation to make good the shortfalls, the checks to doctors, hospitals and pharmacies will be even less than they are today, covering a fraction of the actual cost of care, potentially shutting off access to health care for millions of seniors.
Medicare’s role in our nation’s health care system should not be underestimated. With 48.7 million beneficiaries and an annual price tag of more than $500 billion, Medicare’s share of the federal budget is 13 percent and growing. Today’s payroll deductions and retiree premiums cover less than half of Medicare’s annual price tag. In fact, for Medicare to pay for itself, payroll taxes would need to increase by 31 percent, and the cost to beneficiaries would more than quintuple to nearly $8,000 annually.
Yet, Americans love Medicare, as they should, since benefits far exceed payroll tax and premium payments.
Americans who receive Medicare benefits and enroll in a low-cost supplemental policy have little or no out-of-pocket costs for a host of health care services, from doctor visits to medication, and motorized wheelchairs to diabetic shoes. That array of services to an aging population is expensive, especially when it’s provided to everyone 65 and over, regardless of financial need. This heavily subsidized, federal entitlement program is provided regardless of whether the person is poor, middle class or even Warren Buffett.
Medicare is sustained on the backs of hardworking taxpayers, health care providers and even younger Americans who have private insurance, but who pay higher health care costs because of Medicare. Over the last 20 years, arbitrary federal price controls have led to dramatic decreases in Medicare’s reimbursements to health care providers. Some doctors have accounted for the reduced Medicare reimbursements by charging more for private insurance patients. But insurers now benchmark their fees, often aligning with Medicare’s reimbursement rates. This means the vast majority of health care practitioners who provide care under Medicare, Medicaid or even private insurance, operate under arbitrary, nonnegotiable, federal price controls for a substantial portion of their care delivery. That’s led to poor outcomes, rapidly rising costs, spot shortages, inequities, perverse incentives for overutilization, fraud and even overpayment of certain services.
Obamacare greatly accelerates the demise of Medicare, gutting more than $500 billion from the program and double-counting supposed savings. Worse still, Obamacare entrenches price controls, rations care and eliminates any hope of reinvigorating the free market and encouraging patient choices.
Medicare’s viability is instrumental to the American health care system. We are approaching a near- to mid-term health care and budgetary collapse, but there are several necessary steps we can take to address the looming crisis. The first order of business should be to repeal the president’s health care initiative, that is, if the U.S. Supreme Court does not find it unconstitutional in the meantime. Our next step is to reform the patchwork health care system, starting with the reintroduction of market-based principles into the Medicare system. Health care costs will never be brought down to sustainable levels until we restore market forces. Price controls do not work, whether instituted by Congress or a board of bureaucrats, and whether adhered to by Medicare or private insurance. Americans continue to demand a wide spectrum of choices and freedoms and we must respond robustly.
Democrats and Republicans agree that this country needs a safety net for our seniors and those with disabilities. But inefficient, government-controlled health care and the exploding deficit are leading us to where we will not be able to offer affordable medical services to our aging population. Without real reform, those with the greatest health and financial needs will lose whatever coverage they have.
It must all begin with reforming Medicare.
Dr. John Fleming represents Louisiana’s 4th Congressional District in Congress. This article originally appeared at the Washington Times.