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Not Coming Soon to a Theater Near You: The Medicare Monster!
I remember seeing The Terminator as a young child; this was back when VHS was considered hi-tech and Arnold Schwarzenegger, America’s favorite gun-toting cyborg, had yet to hit the political arena. I saw the post-apocalyptic wasteland, where the poor humans were confined to drab, dilapidated gray fortresses of concrete and steel, surrounded by relentless, murderous and well-armed robots. Needless to say, I was scared out of my three-year-old wits!
If Hollywood movies were an accurate reflection of reality, one might surmise that the greatest danger is from renegade machines decimating humanity. Alternatively, the greatest threat might be from alien invaders in large circular spaceships or legions of flesh-eating zombies. Hollywood action movies, of course, are not always an accurate reflection of reality, which is crucial to their entertainment value.
So what is a more realistic threat that is facing us today? Drumroll please…cue the dramatic orchestra now…introducing…The Medicare Monster! Wow. I don’t think we’ll be seeing this at any movie theatre soon – it really doesn’t have the same appeal as The Terminator. But we can always hope. Just as Al Gore created a popular and much-needed movie about the dangers of global warming (An Inconvenient Truth), perhaps someone will create a movie about The Medicare Monster. I can see the trailer now – “sit down, enjoy your popcorn and hear about an untenable financial mess!”
Since it may be awhile before this movie comes out, I thought I’d write this article now. I hope it helps shed light on an important problem for our readers (and, by the way, if you’re a Hollywood director and you’re reading this, please feel free to call our office). OK, what, you may ask, is this Medicare Monster? Let’s provide a brief introduction.
Franklin Delano Roosevelt, a great figure in American politics, conceived of the New Deal as America was floundering during the Great Depression. Among other things, the New Deal engendered Social Security, which was designed to provide for the retirement of older Americans. Years later, as policy makers recognized that health care costs were one of the greatest challenges facing older Americans, Medicare was born in the mid- 1960’s.
Fast forward to 2006. Social Security and Medicare remain as two of the most popular government programs ever created. Arnold Schwarzenegger and his cyborg friends still haven’t overrun Los Angeles. However, there’s a slight problem. Social Security and Medicare, which are basically funded by payroll taxes, are facing a looming crisis. Both programs are designed so that payroll taxes from current workers are used to provide benefits for retirees (former workers). Unfortunately, payroll taxes alone are not even going to come close to providing enough money. First, the demographics of the “Baby Boomer” generation are such that we will soon have even fewer workers supporting a larger number of retirees. Second, the costs of healthcare – and hence Medicare – are rising at a blistering pace that will outpace inflation.
Wait, you might comment, the title of this opinion piece is “The Medicare Monster!” What about this “Social Security” that you just mentioned? And you’d be absolutely right to bring this up because it raises an important point. Social Security and Medicare are both important problems. So why are we focusing on The Medicare Monster?
The answer is that Medicare poses a far greater problem than Social Security does – it’s like comparing septic shock with a broken arm. Well, this analogy may be imperfect, but the point is that Medicare is the 800-pound gorilla that we should be focusing on. Remember that Medicare is linked to the skyrocketing costs of health care.
Given this, you might expect the issue of Medicare reform to be a hot topic. Actually, it’s not; in fact, there is often more buzz in the political world about reforming Social Security than about reforming Medicare. This may seem odd. What if healthcare profesionals were faced with two problems – one more serious, more complex one and one less serious, less complex one – and decided to focus on the latter and ignore the former? That would seem to be a poor decision. And yet the fact remains that more airtime is given to how to reform Social Security than Medicare.
OK, you might ask, so how bad exactly is The Medicare Monster that you keep referring to? Don’t just trust me – let’s refer to “A Summary of the 2006 Annual Social Security and Medicare Trust Fund Reports,” the official government take on the situation. Remember those payroll taxes that we mentioned? Already, they are not enough to pay for Medicare, so we need to use revenue transfers taken out of general Federal income tax revenues. Last year, we needed 7 percent of total Federal income tax revenues. Not bad, you might say. Well, what’s going to happen in the future? I will provide a direct quote:
“If the Trustee’s projections prove a reliable guide to the next few decades, absent an increase in earmarked sources of revenue for the program, in just 15 years payment of currently scheduled Medicare benefits would require General Fund transfers equal to 25 percent of Federal income tax revenues (projected at their historic level of GDP)-more than triple their 2005 fiscal burden- and less than 10 years later the General Fund transfer would equal nearly 40 percent of Federal income tax revenues. Similarly, Medicare beneficiaries’ out-of-pocket expenses for health care will be consuming a rapidly growing share of their available income over this period.”
40 percent of Federal income tax revenues just to Medicare? Wow. Let me repeat that in a different way – nearly half of ALL Federal tax revenues will be going to ONE program.
If I saw a machine gun-toting cyborg running at me, I’d probably run up to Mount Sutro and go hide in the woods. Well, now that we’re faced with the specter of using 40 percent of all Federal income tax revenues on Medicare, what should we do?
Let us turn to the same report to see what they had to say. Again, I will quote:
“Both Social Security and Medicare are projected to be in poor fiscal shape, though Social Security poses a far more manageable problem in analytic and dollar terms than does Medicare. The fiscal problems of both programs are driven by inexorable demographics and, in the case of Medicare, inexorable health care cost inflation, and are not likely to be ameliorated by economic growth or mere tinkering with program financing.”
Let us examine this conclusion. We have “inexorable demographics” and “inexorable health care cost inflation”, and we cannot count on dramatic increases in GDP or changes in “program financing”. One might conclude – as one of my friends did when he faced imminent defeat in an online computer game – that we are “pretty much pretty screwed”.
I’d like to be more optimistic, but any way that you look at it, we’re in a tough spot. Regardless of how optimistic (or not) you are, the worst thing we could do now is to simply bury our heads in the sand. So, what’s the plan?
One obvious proposal would be to reduce Medicare costs by paying physicians less for treating Medicare patients. However, we should not compromise quality health care by dramatically lowering Medicare reimbursements. The solution is not to punish dedicated physicians by putting their practices in difficult financial situations. If dramatically lowered reimbursements exist, the number of providers who don’t accept Medicare patients will increase. This will reduce options for the elderly and ultimately lead to worse health care access, poorer health outcomes, and ultimately higher costs. If dramatically lowered reimbursements are instituted, this would also force some providers to rush through a greater volume of Medicare patients to make up for reduced reimbursements and keep their practice running. This would be unfair to dedicated providers and their patients.
We also should not lament those new technologies that are costly but better for patients; rather, we should applaud them.
On the other hand, we do need to push for leaders who value fiscal responsibility. We also need to reduce the national debt to a reasonable level so that we stop paying 1/5 of Federal tax revenues simply to interest. In the long run, this will be best for the “economic growth” part of the equation. How about the “health care cost inflation” part? We need to reduce health care costs via improved primary care access and preventive medicine – remembering, as we alluded to above, that dramatically reducing Medicare reimbursements will harm primary care access. The old idiom “an ounce of prevention is worth a pound of cure” must be taken to its maximum potential. We need to consider innovative systems of health care management and delivery; then, after careful analysis, we need a widespread and rapid adoption of those systems that are the best for patients and for the balance sheet.
The Medicare Monster may be horrifyingly daunting, but we have to try our best to address the situation. In this case, let us take a lesson from Hollywood, where the hero never runs away – he or she always stands and fights.
Note: This article originally appeared in Synapse, The UCSF Student Newspaper, in 2006.