As Medicare Faces Financial Collapse, Gop Must Take Bull By The Horns

Bill Clinton committed what should have been an act of political folly last week. He declared his intention to run and hide from the issue of Medicare reform.

“I believe it is wrong simply to slash Medicare and Medicaid to pay for tax cuts for people who are well-off,” he told the White House Conference on Aging. “We must have a sense of what our obligations are.”

Clinton then declared that he won’t do anything to retool the system until Republicans make their views known.

If that doesn’t qualify as cowardice under fire, nothing does.

Yet, the move seemed to frighten the Republicans. Rather than taking the offensive, they tried to match the president evasion for evasion. House Speaker Newt Gingrich talked of postponing discussion of the matter until September, and Senate Republicans said nothing at all.

But the real world doesn’t afford lawmakers the luxury of waiting. Despite the president’s chatter about duty, the cold truth is that the Medicare system is going broke spectacularly - and the crash will hurt everyone.

The most recent report of the trustees of the Medicare system makes the case. The program that finances most outpatient medical treatment - Medicare Part B - has become a fiscal black hole.

It’s no mystery why. Enrollees this year will pay a premium of $46.10 a month and a deductible of $100. In return, they will receive benefits averaging nearly $2,400.

In other words, the system will generate an annual deficit per beneficiary of more than $1,800. The gap will continue to rise - hitting the $3,900 mark in 2002. If the system remains unchanged, Part B could generate a cumulative deficit of $1.5 trillion over the next 20 years.

And that’s the good news.

Medicare Part A, the hospitalization insurance program, will begin collapsing soon. The program draws its revenue from a trust fund that, in theory, contains $135 billion. But that account will begin losing money next year, and trustees guess that it will go broke no later than 2002.

This means big trouble on the federal deficit front. At this instant, Medicare is the fourthlargest program in the federal budget after Social Security, defense and interest on the national debt. It could rise to No. 1 within the next decade if Medicare costs continue to rise twice as quickly as costs in the rest of the medical industry.

To put the debacle in perspective, consider this: The average single-earner household in which the breadwinner retires this year will consume $127,000 more in benefits (under both parts of Medicare) than it has paid for through taxes, contributions and so on. The figure for two-income homes is $117,000; for single females, $65,000; and for single men, $40,000.

To save Part A, Clinton administration statisticians say Congress will have to slow benefit growth immediately by 30 percent or raise taxes 44 percent - even though lawmakers have hiked Medicare levies 23 times in 29 years.

The tax increase would push Medicare outlays to roughly 7.5 percent of earnings - close to the average worker’s 7.65 percent contribution to Social Security. But the change merely would postpone bankruptcy for 25 years.

The status quo subjects retirees to unconscionable uncertainty. A person retiring today has no assurance of receiving Medicare benefits six years from now.

So, the Medicare crisis offers Republicans a sterling chance to dramatize the compassionate potential of free-market reforms while deflating the president’s rhetorical bubble with a dose of truth.

Conservative think tanks have produced a bevy of studies that outline sensible ways to encourage price competition, reward senior citizens who shop for the best prices and put an end to the tyranny of Soviet-style centralized medicine.

The Heritage Foundation will release a series of proposals this week; so will the Progress and Freedom Foundation. Furthermore, the National Center for Policy Analysis has produced bundles of work on the most conservative option of choice - medical savings accounts.

Each organization promotes the same goal - more and better care for a lot less money.

But before the Gingrich brigades lay out a scheme for revolution, they must rebut the president’s warnings of woe. Deborah Steelman, a budget official in the Reagan administration and a prominent Medicare maven, notes that “there is a thirst for information and a premium for leadership” outside the Washington Beltway.

So far, Clinton has tried to lead like an ostrich. That leaves the field wide open for the Republicans - but only if they can muster the courage to tell the unpleasant truth.

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