Medicare: Heading for the ER

April 14, 1995

If Social Security is the third rail of American politics -- touch it and you die -- then Medicare is the poison pill.

Congress has a vivid institutional memory of its ill-fated Medicare Catastrophic Coverage Act of 1988. This was legislation passed to please the old folks by expanding coverage. But it also mandated that the beneficiaries should pay the full costs of the new coverage. When senior citizens realized how much of an income surtax would hit them, they raised such a thunderation that Capitol Hill panicked, rescinding the measure 17 months later.

"We have not repealed the problem," warned Sen. George Mitchell, then the Democratic majority leader. "The problem is bad and getting worse."

So bad, so much worse that six years later a Congress now under Republican control is daring to talk about cuts of up to $150 billion over five years in Medicare costs by trimming the program's annual rise to 7.5 percent from 10.5 percent.

In popping the poison pill, the Republicans are getting no help from the Clinton White House. When Medicare trustees warned this month that the $176 billion program faces insolvency as early as 2002, an administration spokesman said Medicare should be addressed only in the context of overall health care reform.

We disagree. Two Medicare trustees had it right when they said their program should be "addressed urgently as a distinct legislative initiative." After the fiasco that befell Hillary Rodham Clinton's massive health care package last year, Congress cannot be expected to deal broadly with this subject until at least 1997. By then, Medicare's projected bankruptcy will be only five years away and pressure will be building to ward off a predictable crisis in Social Security financing in the years 2013 to 2029. For this reason, prompt action on the well-defined Medicare problem is called for.

While Congress is not about to repeat its 1988 approach, House subcommittees are working on initiatives to cut Medicare costs by applying the managed care techniques used by many health maintenance organizations (HMOs). The aim is to prod seniors into HMO-type arrangements under Medicare. At present, only 9 percent of the elderly are in managed care. The goal: 50 to 75 percent. Even if potential savings are exaggerated, no alternative approach holds more promise. Lawmakers also are examining how new calculations of the consumer price index might hold down increases in the yearly cost of living adjustments (COLAs).

While Democrats wisely object to the use of Medicare cost-cutting to pay for GOP tax cuts, this should not preclude wiser action to apply what could be huge savings to reduce the deficit by tens of billions of dollars annually. Indeed, there can be no hope of balancing the budget overall unless health care costs are reduced substantially. Medicare is a logical place to begin.

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