FixHealthCarePolicy

Congress Should Fix the Current Health Care Deficit

The President and his administration keep saying we cannot afford not to push through a major overhaul to the health care system, one-sixth of the U.S. economy. They’re partially right in that we do have a massive problem we can’t afford not to fix. But the focus is all wrong. Instead of creating a new federal health program, Congress needs to address the spending for Social Security, Medicare and Medicaid — programs that have existed for decades — that is set to explode.

Long-term excess costs for Social Security and Medicare alone are $43 trillion. When added to the national debt, that is about $184,000 for every man, woman and child in the U.S. America’s seniors are going to have to make some tough sacrifices so younger generations like their children and grandchildren aren’t saddled with massive debt to pay for these programs. But forcing them to make these sacrifices in order to create massive new benefits for others is not the way to go about it. (more…)

Tags: entitlements, Medicaid, Medicare, Obama Health Care Plan, Social Security

Fiscal Wake Up Tour

Sometime next month the Senate will be forced to raise the federal debt limit beyond a record $12.1 trillion. While the current recession has exacerbated the problem, our rising national deficits are actually a structural problem a long time in the making. In the coming decades, the cost of Social Security, Medicare, and Medicaid benefits will leap from 8.4% of gross domestic product (GDP) to 18.6% of GDP—an increase of 10.2% of GDP. To educate Americans about our nation’s large and growing fiscal imbalance The Heritage Foundation has, since 2005, teamed up with the The Concord Coalition, The Brookings Institution, and former U. S. Comptroller General David Walker to encourage Americans to demand action through a Fiscal Wake Up Tour.

Today The Concord Coalition released four video briefings from top national experts on the fiscal challenges facing the country, including the one on the right side of the screen, under “Featured Videos,” from Heritage Vice President for Domestic and Economic Policy Studies Stuart Butler.

You can find many of the charts used in Butler’s presentation in the 2009 Federal Revenue and Spending Book of Charts.

Last year 16 federal budget experts from seven think tanks (including: American Enterprise Institute, Brookings Institution, Concord Coalition, Heritage Foundation, New America Foundation, Progressive Policy Institute, and Urban Institute) issued a paper concluding:

• Congress should enact a real long-term budget for Medicare, Medicaid and Social Security that would limit their growth, take them off auto-pilot, and curb their current ability in the budget process to pre-empt funds from other types of programs, such as defense.
• Congress and the President should enact long-term budgets for Social Security, Medicare, and Medicaid and be required to review them every five years. The rules for the five-year review must include a trigger or action-forcing device that automatically make changes when projected spending exceeds budgeted amounts.
• The long-run costs of these three programs should be made visible in the budget at all times and considered when decisions are made.

The Heritage Foundation further recommends:

• Income-adjusting Social Security benefits to target needy seniors more effectively. This could be accomplished through “progressive indexing,” which would index initial benefit levels for middle-income and upper-income families to price inflation rather than wage growth, eliminating much of the increased Social Security costs driven by higher ben­efits. This would also target more benefit growth to lower-income retirees. If accompanied by an increase in the retirement age, progressive indexing could eliminate the entire Social Security shortfall.
• Reducing the massive Medicare Part B and Part D subsidies for upper-income families. These programs are not social insurance: Enrollees did not earn their benefits with payroll taxes. Rather, they are large subsidies from taxpayers. Part B recently began modest income-relating. Long-term fundamental reform will likely involve bringing more choice and competition into health care, such as moving Medicare from a defined-benefit system to a defined-contribution system.
• Converting Medicaid into a block grant to states would eliminate state incentives to overspend on Medicaid. Additionally, giving states more flexibility to craft different Medic­aid packages for different individuals based on their unique personal circumstances could save money while improving service delivery. State incentives to help individuals purchase long-term care insur­ance could also substantially reduce Medicaid’s bur­den insofar as these expenses are concerned.

Tags: Brookings Institution, Concord Coalition, entitlements, Fiscal Wake-Up Tour, Medicaid, Medicare, Social Security

To Control Health Care Spending, Fix Medicare

Medicare is rushing towards fiscal disaster. Heritage’s Greg D’Angelo and Robert Moffit, Ph.D. lay out the facts:

“Within three years, the first wave of the gigantic baby boom generation will start to retire and impose a demand on medical services unprecedented in the nation’s history. The traditional Medicare program is not capable of absorbing such a shock without some fundamental changes…Medicare’s long-term unfunded obligation–the benefits promised but unpaid for–totals $37.8 trillion, or more than two-and-a-half times the current size of the entire U.S. economy.”

In fact, expenditures out of Medicare Part A—the part that pays hospital bills—are expected to exceed revenues in just eight years.

As D’Angelo and Moffit explain, The Congressional Budget Office has found that the policies in Democrats’ proposals aimed at controlling skyrocketing Medicare expenditures “are unlikely to deliver the level of savings hoped for.” Worse still, most of the savings “are not dedicated to reduce [Medicare’s] obligations but rather siphoned off to financing Obama’s health care agenda.”

Experts at The Heritage Foundation have worked with scholars from The Brookings Institution and other prominent think tanks across the ideological spectrum to address this urgent problem. The scholars recommend that:

“-Congress and the president enact explicit long-term budgets for Medicare, Medicaid, and Social Security that are sustainable, set limits on automatic spending growth, and reduce the relatively favorable budgetary treatment of these programs compared with other types of expenditures.
-The programs be reviewed on a regular schedule by the Social Security and Medicare Trustees or the Congressional Budget Office to determine whether they will remain within budgeted amounts.
-Significant long-term deviations from budgeted amounts trigger automatic adjustments in benefits, premiums, provider payments, or other revenues. These adjustments could only be over-ridden by an explicit vote of Congress and acceptance by the president.”

Tags: CBO, entitlements, health spending, Medicare

Entitlement Reform Is Necessary for Long-Term Fiscal Stability

Entitlement spending is projected to exceed 20 percent of GDP by 2060. Furthermore, the U.S. will be spending a crushing 22 percent of GDP to service the debt accumulated from five decades of debt-financed federal spending. While Medicare and Medicaid spending poses a greater fiscal threat, Social Security offers a relatively smaller challenge that can be addressed within the parameters of the program itself.

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Tags: entitlements, Medicaid, Medicare