Medicare still needs reform

Late last month, the Boards of Trustees for Medicare released their annual report to Congress on the financial operations and actuarial status of the program.  The boards adjusted their projection for depletion of the Medicare Trust Fund by two years – from 2024 to 2026 –extending the solvency of the program and painting a rosier financial picture than previous years.  The adjusted projection is largely based on recent trends of slowed health care spending growth rates – and the media was quick to cover the good news and celebrate the improved outlook for Medicare.

However, despite this good news, or perhaps because of it, it is important that we make a point to emphasize the real and continued need for Medicare reform.  Unfortunately, we’ve seen slow-downs in health care spending before, and just as quickly as they came, they have gone away.  As much as I would love to believe the trends we’ve seen in recent years will continue, and that the problem of excess costs in Medicare is over, such belief would be naïve.  Much of the slow-down in spending growth can be attributed to the recession, which inevitably slows spending patterns across the board.  In addition, the imminent implementation of Affordable Care Act subsidies and Medicaid expansions will further boost spending.

Moreover, if the slow-growth trend holds, Medicare is projected to add 30 million new beneficiaries in the next 20 years – which will place significant added cost pressure on the program.  This trend cannot be altered, nor avoided nor wished away.  Adding 30 million people to the program will raise the cost of program and must be dealt with.

As important as program solvency and financial health are, finances are not the only reason to fix the Medicare program.  Medicare was developed in the 1960s and, as such, no longer meets the needs of the Medicare patient today.  Today’s beneficiaries have different demands; they are living longer with more chronic conditions, and are receiving care in a variety of settings.  Medicare must be updated to adapt to these changing demands so that patients can receive the best, most effective care.

Providing the best care for beneficiaries to improve their health and better their lives is the chief purpose for reform and simply the right thing to do.  Sorting out the program’s finances and ensuring that the program is viable for generations to come is only one step in accomplishing this.  Other, interrelated, steps include reforms to the program’s payment and delivery systems, enhanced transparency and accountability, better support and coordination for vulnerable populations – the list goes on.  All of these steps (and more) should be part of a comprehensive effort to reform the Medicare program.

Despite the optimistic chatter on health spending trends, Medicare has never left the policy debate, largely because of a renewed focus on repealing the Sustainable Growth Rate formula.  This is a narrow goal – desirable in its own right, but no substitute for comprehensive reform.  Policymakers should look past the narrow reforms and short-term cost trends to deliver to beneficiaries a program that better meets their needs.

Holtz-Eakin, president of the American Action Forum, is co-chair of the Partnership for the Future of Medicare, a bipartisan organization focused on ensuring the long-term security of Medicare.


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