By Scott W. Atlas, M.D.
Why don’t Americans demand that our leaders in the government reform Medicare, and do it with the greatest of urgency? After all, nothing has really changed about the impending failure of this nation’s health care safety net for our seniors. Medicare is still going broke. It is generating massive debt and crowding out other essential, constitutional obligations of government. And ultimately it will increasingly fail to provide access to important medical care, the reason for its very existence.
Obviously, Americans do not buy into the message of economic Armageddon for Medicare, and that may be understandable. Indeed, we have heard for many years from the Centers for Medicaid and Medicare that the Medicare Trust Fund will soon be bankrupt, most recently estimated to become exhausted in 2024. Yet, Medicare certainly continues to function, even though seniors are likely not aware that it denies claims far more frequently than private insurers, and even though more and more doctors do not accept Medicare patients because of poor payments.
Why would Medicare face bankruptcy and be unsustainable after seemingly delivering on its original promises for decades? One needs only to look at the nation’s demographics to understand the undeniable truth. An unprecedented ramp-up of enrollment into Medicare is going to occur for the next twenty years with the entrance of the baby boomer generation, after which an increase at the same rate as over the past 40 years will follow. This translates into some stunning problems with financing Medicare. At Medicare’s inception in 1965, about 4.6 workers supported each beneficiary with their tax dollars. By 2011, only 3.3 workers per beneficiary were paying taxes to the program. By 2030, only 2.3 taxpayers will be funding the insurance per beneficiary – one half of the original number when the program began. And that ratio will continue to decrease. In addition, the impact of the aging of the population on future federal spending will be massive, in part because of the remarkable health gains allowing seniors to live longer and need the life-saving procedures and innovative treatments that never existed when the program was instituted.
The future is worse than bleak, even though liberal publications like the New York Times now assert that there really is no need to fix Medicare (Medicare Needs Fixing, but Not Right Now, February 26, 2013). In the latest economic forecast published in February, the Congressional Budget Office revised down its 10-year spending projection for Medicare by $137 billion, or about two percent. CBO recalculated its projections because spending in Medicare Parts A and B has risen by an average of only 2.9 percent per year since 2009, far less than the 8.4 percent annual growth seen between 2002 and 2009. Is this the new normal in health care expenditures? Although not fully understood, most policymakers recognize that several factors, including the persistent high unemployment and reduced incomes of Americans have contributed to the slowing of growth (notably not a decrease, but a slowing of the increase) in health expenditures. Are Americans so naïve to believe that the Affordability Care Act, a program that did not even exist in 2009, and whose most significant regulations have still yet to be implemented, should be credited?
Regardless of how Medicare is funded and how many taxpayers foot the bill, the program is simply not sustainable in its current form by any economic analysis. Despite the relative slowdown in the saga of hemorrhaging the taxpayers’ money, CBO estimated that total Medicare spending will reach over $1 trillion in fiscal year 2023, with total federal outlays for health care programs totaling $1.845 trillion. By 2050, Medicare, Medicaid and other federally supported health care, along with Social Security, will consume literally 100 percent of all tax revenues, totaling over 18% of GDP – eliminating any possible spending on national defense, any other domestic programs, and any payment of interest on the national debt. Statistics and projections can be wrong, but shouldn’t the possibility of crowding out virtually all other federal budget items alarm even the most passionate believers in social welfare programs?
Simply delaying the inevitable at the expense of our children and grandchildren should not be tolerated by voters. From Medicare alone, the nation faces a long-term unfunded liability of more than $30 trillion dollars by 2050. This massive debt represents an unconscionable burden on future generations. Are Americans truly willing to destroy the future fiscal health of this country on the backs of their own children?
Even if Americans want to ignore the fiscal realities, one sad truth is coming, ready or not. Voters and our politicians seem to be unaware that a significant proportion of doctors already do not accept Medicare patients, primarily because of inadequate payment for services, and that number is increasing. The Medicare Payment Advisory Commission, an independent federal panel, said that 29 percent of Medicare beneficiaries who were looking for a primary care doctor had a problem finding one. In the 2008 HSC national survey, more than 20 percent of primary care doctors refused to see all new Medicare patients (only 4.5 percent refused all new privately insured patients); about 40 percent of primary care doctors and 20 percent of specialists refused most new Medicare patients.
The problem of physician access is about to increase dramatically. By 2019, Medicare payments become even lower than Medicaid. According to the Medicare Trustees, Medicare payment reductions under the new law will cause hospitals, nursing facilities, and home health agencies to operate at a loss – 15 percent lose money by 2019, 25 percent by 2030, and 40 percent by 2050. The Trustees Report openly acknowledged the obvious – these health care facilities “would have to withdraw from serving Medicare beneficiaries, or shift substantial portions of Medicare costs to their non-Medicare, non-Medicaid payers.” The bottom line is insurance without access to medical care is an illusion, and that is exactly what is in store for Medicare patients.
What can our government do to help preserve and strengthen Medicare, so that meaningful health coverage and access to medical care can be provided, rather than just the façade of insurance for America’s seniors?
First, common sense must prevail when thinking about eligibility for entitlement programs like Medicare. Although impossible to accurately estimate, increasing the eligibility age to 67 would save about $150 billion dollars over the next decade, according to CBO. We know that life expectancy of Americans has risen almost a full 10 years since the inception of Medicare back in 1966. Along with this significant prolongation of life, innumerable advances in medical care leading to better health of the elderly over the past half century have become commonplace. Better health has allowed a far larger percentage of seniors to continue working, so they will likely have employer-sponsored insurance unless ObamaCare destroys the viability of that option. Indeed, the Bureau of Labor Statistics predicted that the number of workers between the ages of 65 and 74 would soar by 83.4 percent between 2006 and 2016 and by 84.3 percent for those 75 and older. By 2016, workers age 65 and over are expected to account for 6.1 percent of the total labor force, almost double their 2006 share of 3.6 percent. The evidence has already begun to validate these predictions. In just over the past half dozen years, the percentage of Americans over age 65 still working has increased by about 10 percent. Clearly, today’s 65 year old is not your father’s 65 year old by any criterion, so adjusting the eligibility age for Medicare coverage seems not only logical but a natural evolution of our times.
Second, our president and Congress should act within the core American principle that all Americans deserve liberty and personal choice in pursuit of health. It seems contradictory, almost absurd, that our president and representatives in Congress insist on selectively decreeing the availability of certain medical procedures (like abortion), while simultaneously limiting, as the sole insurance provider for seniors and as the definer of “essential benefits” for all insurers, access to the entire spectrum of medical tests and procedures in diseases. Rather than selecting benefits and distorting the availability of medical procedures, diagnostic algorithms, and treatment pathways, shouldn’t government instead get out of the way and empower its citizens with more transparency of prices and information, as well as autonomy and choice about something as vital and personal as health care coverage?
What is to fear about allowing the option to use the Medicare benefit as cash for seniors who might want to find cheaper insurance more tailored to their own needs instead of traditional Medicare? Similar cash payments are found throughout all of the other entitlement programs, including social security. Government beneficiaries don’t receive bags of groceries or clothing – all just as essential as health care – chosen by the government. And it is probably news to people fearful of change that we already know premium support payments work well within Medicare Part D, the prescription drug benefit, delivered via private plans that submit bids, while the government provides a defined contribution to purchase those plans for Medicare beneficiaries. After seven years, the program is highly satisfactory to beneficiaries, and it is under budget, running more than 40 percent below its initial estimates, thus providing strong evidence that more consumer choice and competition controls costs and benefits consumers.
Medicare is in deep trouble, and regardless of some slowing in the rise of national health expenditures, it would only be one more example of a failure of leadership if this government puts off the necessary reforms of Medicare, this nation’s most important health care safety net for America’s seniors. While this government continues the drumbeat of more top-down regulations on health care, insurance coverage, and payments to doctors, every year for the next two decades roughly 3 to 4 million more seniors become newly eligible for Medicare. This demographic inevitability does not even consider that over the next decades, two very expensive consequences accompany the increasing longevity arising from American medical technology and innovation: more people will survive to die of chronic diseases that require expensive drugs, diagnostics, and medical care; and more people will live with disorders that don’t kill them, but that produce disability and poor health. Is the urgency not obvious?
Scott W. Atlas, M.D. Senior Fellow and member of the Working Group on Health Care Policy at the Hoover Institution of Stanford University.