A Dose of Reform
By Dianne Feinstein and Don Nickles
Dianne Feinstein is a Democratic senator from California. Don Nickles is a Republican senator from Oklahoma.
Wednesday, October 22, 2003; Page A29
Wrestling with the complexities of how to add prescription drug coverage to the Medicare program has been high on the political to-do list for at least five Congresses. This year, more than ever, there is a glimmer of hope that all the debate, formulas and analyses might coalesce into law.
That would be good news for today's seniors. But if a final agreement is devoid of even the smallest steps to make Medicare more financially sound, it would be bad news for tomorrow's seniors.
The opportunity for common-sense reform is within our reach and Congress should not miss it. One idea with a history of bipartisan Senate support is our amendment to change the Medicare Part B premium subsidy so that the wealthiest 2 percent of seniors pay a larger share of their monthly premium -- those individuals earning more than $100,000 and couples earning more than $200,000 annually.
A brief tutorial on the Medicare program helps explain why reform is critical and why this is a good starting point.
During the past 40 years, the average life expectancy has jumped from 70.2 years to 76.9 years. During the next 40 years, the number of Americans 65 and older will more than double, rising from 37 million today to 82 million in 2050.
The result of these demographic shifts, combined with rapidly rising health care costs, is a troubling fiscal picture for Medicare. During the next 75 years, Medicare will owe benefits exceeding its income by $13.3 trillion -- that's twice the current national debt and does not take into account the additional cost of a new drug benefit.
Previous prescription drug proposals have been estimated to add another $4.6 trillion to $7 trillion on top of that, for a staggering total of $18 trillion to $20 trillion in unfunded promises.
Without any reforms, Congress would have to triple Medicare payroll taxes to make up that shortfall. Proposals such as our Part B premium change would help.
Medicare has two components -- one part covering hospitals and one part covering physicians and lab services. The hospital portion is funded by the 2.9 percent payroll tax individuals and their employers pay during their working years.
All workers pay into the fund, and all seniors are entitled to its benefits. Period.
But the physician portion, or Part B, is an optional plan seniors can buy once they qualify for Medicare. When Medicare was established in 1965, the Part B premium for participants was set at a fixed dollar amount that covered about 50 percent of the cost.
With the rapid acceleration of medical inflation, the premium gradually declined in value to only 25 percent of the program's cost. That percentage was fixed into law in 1997.
The other three-fourths of the cost is subsidized by the government's general revenue -- mostly income taxes. The cost of this subsidy is rising.
In 2002, close to 8 percent of all corporate and personal income taxes collected were used to cover this 75 percent subsidy of Part B. All things remaining equal, by 2077 fully one-third of all income taxes will be needed to pay the tab.
Think of that: one-third of all taxes immediately diverted to Medicare before any budgeting for national defense, homeland security, education, highways or other important programs.
What's more, this subsidy is provided to all seniors, regardless of income.
The Concord Coalition has spelled out the practical effect of this as follows: "It makes no sense for a couple with two children and a $50,000 income (about the national median for family households) -- trying to buy a home, trying to find affordable health insurance, trying to save for their kids' education, and trying to put aside something for retirement -- to have to pay 75 percent of the Medicare premium for a retired couple whose income exceeds $150,000 a year."
We could not agree more. Why should low-income families pay 75 percent of the bill for Ross Perot to have a checkup? Under our proposal, 98 percent of seniors would continue to pay only 25 percent of their Part B premium, as they would under current law.
Those individuals who earn more than $100,000 per year and couples who earn more than $200,000 per year would be asked to pay more, based on income and phased in over time. Individuals earning more than $200,000 and couples earning more than $400,000 annually would pay as much as 100 percent of the Part B subsidy.
The Senate has twice voiced strong bipartisan support for relating income to Part B premiums in recent years -- in 1997 and again this year during debate of the Medicare prescription drug bill. Unfortunately, the amendment, which we sponsored along with Sen. Lincoln Chafee (R-R.I.) and Sen. Lindsey Graham (R-S.C.), was not included in the final package passed by the Senate.
As House and Senate conferees work out the differences between the bills, opponents of reform must consider which is worse: making no promises at all, or making a promise they can't keep. Adding a drug benefit without also strengthening the underlying program is like building a second story on a house with a crumbling foundation.
Seniors may be forced into a government-run drug benefit system that is destined to collapse because it is overcommitted and underfunded.
Relating Part B to income is not a cure-all for this problem. It would offset only a fraction of the cost of adding a new drug benefit. But it adds a dose of honesty to the mix by acknowledging the looming financial problems the Medicare system faces.
Avoiding real reform now does not make the problem go away. It simply leaves tougher choices to future generations and future Congresses.
Dianne Feinstein is a Democratic senator from California. Don Nickles is a Republican senator from Oklahoma. |
