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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Medicare Will Become Taxing

Robert E. Moffit Special To Knight-Ridder

With Congress and the White House once again controlled by opposing parties, America will probably have to endure yet another round of political football over Medicare reform. Only this time, the stakes will be higher and the measures needed to reform the program will be harder to enact than they would have been last year.

The Medicare trust fund, which pays hospital bills for America’s elderly, will post a $4.2 billion deficit this year.

Most Americans think Medicare hospitalization is like every other government program: If the government comes up short, it can simply borrow or print more paper money to cover the costs. This isn’t true.

The Medicare bureaucracy has no borrowing authority for Medicare hospitalization, and the U.S. Treasury is not authorized under current law to borrow on Medicare’s behalf. There is “no authority” to pay hospital insurance benefits, say the Medicare trustees, if the assets of the hospitalization trust funds are depleted.

And the longer we wait to save Medicare from bankruptcy - which will arrive for the hospitalization trust fund by 2001 according to the Medicare trustees - the worse the options become. Eventually, they will narrow down to two: impose huge new payroll tax increases on all Americans, or withdraw Medicare benefits from many who need them. Politicians aren’t going to take away Medicare benefits when they can raise taxes. So that’s probably what they will do.

But the average family of four already pays more than one-third of its income in taxes. Federal taxes take about 25 percent of family income. In some families, federal Social Security and Medicare payroll taxes take more than federal income taxes. If the hospitalization trust fund goes broke as scheduled in 2001, the average American household will be forced to pay $4,000 in new taxes over the next four years to bail it out.

And even if we do manage somehow to shore up the hospitalization trust fund, we still have Medicare Part B, the part of the program that is paying doctors and outpatient medical services. Costs in that part of the program have been exploding. This is an even more serious fiscal problem. If nothing is done, the total cost of Medicare Part B to the average household will be $10,000 in taxes between 1996 and 2005.

Medicare reform is not simply a matter of dollars and cents. Medicare must be modernized. It is governed by more than 22,000 pages of rules, regulations and guidelines. Its pricing schemes for doctors and hospitals are incredibly complex and cumbersome. Medicare always pays too much, or too little, or the bureaucrats don’t have enough data, or they don’t take into account the right factors, or enough factors.

Last year, the General Accounting Office, Congress’ financial investigative arm, found that Medicare paid more for the elderly in managed care than it would have if the elderly had remained in the old fee-for-service system. The Medicare bureaucracy is studying ways to correct the problem, but the results are likely to be “years away.” Even when the Medicare bureaucracy tries to put itself in order it comes off looking like an old Soviet factory-management team.

The best option for Medicare reform is to organize it along the same lines as the Federal Employees Health Benefits Program (FEHBP), a consumer-driven system based on choice and market competition. The 36-year-old FEHBP has almost 400 health-care-plan options with a wide variety of benefits, all competing for the dollars of members of Congress, congressional staffers, federal workers and their families - altogether almost 9 million people.

Covered under FEHBP are 1.6 million federal retirees and their dependents, including an estimated 200,000 retirees who aren’t eligible for Medicare hospitalization coverage. FEHBP controls costs better than Medicare or private, employer-based insurance. In 1995, FEHBP premiums decreased by 3.3 percent; in 1996 they increased four-tenths of one percent; in 1997 premiums are expected to rise by just 2.4 percent, and 64 percent of all enrollees will see their premiums remain the same or decrease from 1996 rates.

This is a plan that can save Medicare and make it more efficient. Regardless of how Congress and the White House lock horns over the problem, one thing is certain: We cannot continue to run Medicare as it is run today, and everyone in Washington knows it. It’s time for policy-makers to stop playing politics, show some courage, and take the necessary steps to reform Medicare.

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