February 05, 2013
5 entitlement reforms for better fiscal course
American families are used to working with dollar amounts starting with hundreds and thousands. But the fiscal situation of our country requires us to act in terms of billions and trillions.
The numbers are well-known — our national debt is nearing $16.5 trillion, with annual trillion-dollar deficits having become the norm.
Despite claims to the contrary, increased revenue alone cannot fix our debt crisis. The only way to get a grip on our financial outlook is to address the largest contributors to our debt — our nation’s entitlement programs, specifically Medicare and Medicaid.
Unfortunately, waiting until the last minute to stop a crisis has become standard operating procedure in Washington. But that isn’t how we should be tackling our debt or safeguarding Medicare and Medicaid. In fact, when it comes to these two programs, there’s room to come together today using reforms that both Democrats and Republicans have supported in the past. It’s time to look at them anew and act on them as a means of both bringing down our skyrocketing debt and shoring up Medicare and Medicaid for future generations.
I recently laid out five specific, reasonable and responsible entitlement reforms that would help to rein in entitlement spending and put our nation on a better fiscal course. Furthermore, each of these common-sense reforms has been supported by both political parties over the years — including notable Democrats from President Bill Clinton to Alice Rivlin.
Medicare and Medicaid alone will cost taxpayers $12 trillion over the next 10 years. To put that in perspective, $12 trillion is more than the entire economies of Germany, France, the United Kingdom, Italy and Spain combined.
Medicare will spend more than $7 trillion over the next 10 years, which is more than we spend on our national defense. With numbers like this, fixing Medicare won’t be just a matter of trimming off some excess fat and waste — the problems are systemic.
Medicaid isn’t much better. It cost about $457 billion last year, and federal Medicaid spending as a share of the U.S. economy is set to grow by 37 percent over the next decade.
These programs are slowly — but surely — swallowing up our economy.
That’s why we need to act — and act now, because the longer we wait, the harder it will be to reform these programs.
First, we must adjust the Medicare eligibility age from 65 to 67. Americans are living longer, and raising the retirement age would reflect that, while helping shore up Medicare as well.
Second, we need to modernize the Medigap program, which provides additional insurance coverage for out-of-pocket medical expenses.
Those with Medigap policies often overconsume health care services and procedures — driving up costs for all seniors in Medicare. With real reforms, we can help seniors make the best, most educated health care decisions while reducing costs to Medicare.
Third, we must simplify Medicare cost-sharing, while protecting seniors from catastrophic health costs.
Both Medicare Part A, for inpatient hospital services, and Medicare Part B, for outpatient services, have separate and very different deductibles and copays. This setup is not only needlessly complicated but encourages the overuse of health care as well. Creating a single combined deductible will not only make it easier for seniors but will reduce the overconsumption of health care, while driving down costs.
Right now, the Medicare program gives seniors little financial protection from very expensive out-of-pocket costs when facing a severe illness — pushing many toward medical bankruptcy. By establishing a catastrophic cap that limits the amount they have to pay, seniors will be given much needed financial security.
Fourth, it’s time to increase much needed competition to Medicare. Allowing private health plans to compete with traditional fee-for-service Medicare empowers seniors to choose the best plan for them, while reducing costs and improving the quality of care they receive.
Finally, Medicaid needs to be reformed as well. Giving states a set amount of money for each person on Medicaid will greatly improve this program’s financial footing, while improving patient care.
These ideas aren’t new, but they are bipartisan and they deserve to be a part of any deficit discussion if we are going to get serious about our debt. They represent a reasonable path forward for both our seniors and the financial future of our country. Let’s get to work.
Sen. Orrin Hatch (R-Utah) is the ranking member of the Senate Finance Committee.
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