Issues for us all: Health and Money

So you don’t think Medicare and budget deficits apply to you? Think again. Changes or cuts to the Medicare program could affect all age groups, including twenty and thirty-somethings. Not only do disabled people of all ages receive Medicare, but also many younger workers have aging parents who depend on the program, and cuts could result in sons and daughters paying out of pocket for services or providing in-home care themselves.

What is Medicare?

Currently, Medicare is available to the disabled and everyone over 65. It is an insurance program that pays doctors and hospitals whenever they treat a patient (fee-for-serive). Each individual pays a relatively low monthly fee (premium) to be part of the system whether they ever get sick or not. Federal law defines the benefits available to beneficiaries, who can access services through any doctor that accepts Medicare. Medicare benefits are the same for everyone, whether or not they could afford to pay for those services on their own.

Medicare is divided into several parts. Part A covers hospital and other inpatient services. Part B covers doctor visits and other outpatient services, including durable medical equipment. Part C, most commonly known as Medicare Advantage (previously Medicare+Choice), makes available Medicare-covered health care services through a Medicare private health plan, such as an HMO, PPO or PFFS plan. These plans supervise your medical care and decide which services, other than your primary care doctor, you may have. Starting January 1, 2006, Medicare will begin offering coverage for prescription drugs under a new part of Medicare (Part D). Private companies will provide the coverage and tax dollars will go to them to make sure that they can afford to compete for members.

As you can imagine, the cost of Medicare continues to rise as the cost of new tests, diagnostic machines, and medicines are added to the cost of hospitalization.

Some say that Congress should cut back the program in order to help balance the budget. They question making Medicare a priority for government spending of tax dollars.

Greenspan’s plan

Federal Reserve Chairman Alan Greenspan is retiring and has some departing advice for Congress: Cut entitlement programs like Medicare to get the budget deficit in check.

Although Greenspan believes that higher taxes would help another way to balance the budget, he favors the cuts, since raising taxes may stifle investment in businesses that create jobs - "the economy".

Greenspan discourages further development of the Medicare program, such as the prescription drug benefit: "New programs, whether spending or tax benefits, quickly develop constituencies who tend to fiercely resist any curtailment. As a consequence, our ability to rein in deficit-expanding initiatives, should they later prove to have been excessive or misguided, is quite limited."

In other words, once a program like the prescription drug benefit is offered, it is hard to reshape or cut it, even if it turns out to be inefficient and adding considerable weight to the budget deficit. Medicare, however, is reported to be very efficient in administrative costs to the government. Paperwork for doctors and hospitals does add sizeably to their expenses.

Where the White House sits

The Bush administration would like to limit the growth of many federal programs as well, including Medicare, Social Security and benefits for retired federal employees and disability compensation for veterans.

Cutting back on these programs would help to decrease the budget deficit, which hit a record high of $413 billion in 2004. Bush has promised to cut this number in half by the end of his term in 2008 and believes that the best way to do this is to restrict spending on expensive "social" programs.

Entitlement programs, amounted to 54 percent of the 2004 budget, and without reform, the Congressional Budget Office says that they will consume 58 percent of the budget by 2014.

But even though entitlement programs like Medicare and Medicaid are getting more expensive, the ballooning deficit is also due to less taxes coming in (tax cuts) and greater spending (homeland security and the operations in Iraq and Afghanistan, and Katrina).

Philosophy behind the policy

Any decision to cut back on social programs is the result of a specific philosophy: public money should be used for defense, security, and national infrastructure, but most workers should save and pay themselves for health care, childcare, and other human services.

This view is in contrast to the philosophy that all Americans are entitled to health care and retirement benefits. According to this line of thinking, the federal government can and should use tax dollars which are our dollars to ensure basic benefits to everyone.

Which philosophy makes sense to you? Are you willing to cut benefits to ease the budget deficit? Should government prioritize cutting the deficit (fiscal responsibility) over health care? Is there a way to do both?

What do you think?

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Posted on: 12/11/2005