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Last updateTue, 04 Nov 2014 9pm

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Medicare deserves a bi-partisan solution

During the debate over health care reform, one of the cries from its opponents, and at times, from its supporters, was that we simply couldn’t have a direct payer system. Words like un-American, anti-free enterprise, and oh yes, dangerous, were repeatedly tossed about. But many Americans are often surprised to know that America has had a classic, almost European style direct payer system for 46 years. It’s Medicare and it’s the primary source of medical coverage for Americans over the age of 65.

It’s a complicated system, and I don’t begin to fully understand it. Most recipients, as I have found, don’t understand it either. And doctors are only a

little better off in that regard. Medicare Part A is for Hospital Coverage, Part B is for Medical Insurance, and Part D is for prescription drugs, and oh yes, you can buy private insurance to cover the 20% of medical costs Medicare doesn’t cover. It may be complicated, it may sometimes be trying, but for tens of millions of older Americans it’s been the difference between having medical care and not having medical care.

The program operates under a fairly simple funding formula. Employees pay 1.45% of their pay and employers match it. The money goes into a trust fund, just like social security, and for much of its history, Medicare functioned on a pay as you go basis. The number of workers paying into the system pretty much covered the costs of the retirees needing care. But that relationship, for a host of reasons, is breaking down. Medicare’s funding mechanism isn’t keeping up and when that happens the next step is going directly to the Federal Treasury. However, as most everyone knows by now, with the U.S. funding a third of its annual budget by borrowing, the General Fund as it’s called, is in no position to afford any new obligations.

Perhaps the biggest reason for Medicare’s funding woes is the growing number of people who are entering the Medicare rolls. With the retirement of the Baby Boomers (the children born between 1945 and 1964), the number of Americans on Medicare, by 2030, is expected to reach 80 million. That’s the equivalent to nearly a third of our current population. What’s more, these people are going to live longer than their parents and grand parents and will probably consume far more in medical services.

Another major driver behind Medicare’s financial woes is the growing cost of medical care. In 1965, most treatments, for cancer, for stroke, heart disease, arthritis, diabetes, and a host of illnesses that plague the elderly, were limited. Costs were also relatively low. Today, it’s another story. There is more care available and it is far more effective. But it’s also expensive. The cost of care for all sorts of treatment, from the routine, to the intensive, has grown at a rate far in excess of the rate for almost any other service or consumable. And with more people joining the system and the costs of treatment growing by leaps and bounds, the system is nearing its breaking point.

When it comes to government spending, quoting dollars can be a little overwhelming. Sometimes a better way to express the cost is a percent of the Gross Domestic Product. That’s the sum total of everything the nations makes, saves and spends. Last year it was over $14 Trillion. In 1966, when the GDP, by comparison was much smaller, Medicare was 4% of GDP, today its 8.4%. By 2030, some are saying it will reach 18.6% of GDP.

Medicare and how to pay for it, is a major national problem – one that deserves serious and studied attention. But that’s not the way it’s being treated. Sadly, both parties, by turning it into a partisan issue have made a mockery of the issue. They should be ashamed of themselves. The GOP proposed its plan with all the sensitivity of a bulldozer and in the process managed to frighten the wits out of millions of our nation’s elderly. That’s not a good way to promote change. However, Democrats, in return, offered almost no creative thought, and gave the predictable knee jerk reaction, saying the Republicans were out to trash Medicare. They promise to save it, but express almost no interest in dealing with its sorry financial state.

There is no easy way to fix Medicare, but both sides need to be proactive now about trying to save it. The Republican idea to develop ways to provide services in a more cost competitive manner (hard to do in the current single payer framework) deserves consideration. Also, fraud is a surprisingly big issue in this program. Medicare has proven easy pickings for criminals anxious to defraud the elderly and the government. Going after these criminals with a vengeance could save a lot of money. And finally, perhaps it’s time Medicare did some means testing. Should it be care for all Americans, age 65 or older, or only those who can’t afford other means of acquiring health care services?

These are all touchy subjects, but it’s time we started looking at them, before it’s too late.

You may reach David Kerr at This email address is being protected from spambots. You need JavaScript enabled to view it.

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