The Trojan Horse
November 14, 2003
OP-ED COLUMNIST
By PAUL KRUGMAN
nytimes.com
...Some background: originally, Medicare provided only hospital insurance, paid for with a special tax on wages — and this tax, according to estimates from the trustees, will be enough to cover hospital insurance costs for at least 20 more years. Medicare now also includes additional benefits, but the costs of these benefits have always been covered out of general revenue — that is, money raised by other taxes.
But one of the proposals being negotiated behind closed doors — misleadingly described as "cost containment" — would set a limit on Medicare's use of general revenue, and would require action seven years before projections say that limit will be breached. This rule is reinforced with a peculiar new definition of "general revenue" that includes interest on the Medicare trust fund, accumulated out of past payroll taxes. The effect would be to force the government to declare a Medicare crisis in 2010 or 2011.
You might say it's a good idea to face up to Medicare's problems early. But the legislation would allow only two responses: either an increase in the payroll tax (a regressive tax that bears more heavily on middle-class families than on the wealthy) or benefit cuts. Other possibilities, like increases in other taxes or other spending cuts, would be ruled out. In short, this is an attempt to pre-empt discussion of how we want to deal with Medicare's future and impose a solution reflecting a particular ideology.
Meanwhile, another proposal — to force Medicare to compete with private insurers — seems intended to undermine the whole system.
This proposal goes under the name of "premium support." Medicare would no longer cover whatever medical costs an individual faced; instead, retirees would receive a lump sum to buy private insurance. (Those who opted to remain with the traditional system would have to pay extra premiums.) The ostensible rationale for this change is the claim that private insurers can provide better, cheaper medical care.
But many studies predict that private insurers would cherry-pick the best (healthiest) prospects, leaving traditional Medicare with retirees who are likely to have high medical costs. These higher costs would then be reflected in the extra payments required to stay in traditional fee-for-service coverage. The effect would be to put health care out of reach for many older Americans. As a 2002 study by the Kaiser Family Foundation judiciously put it, "Difficulties in adjusting for beneficiary health status . . . could make the traditional Medicare FFS program unaffordable to a large portion of beneficiaries." |
