(3 of 8)
Thus there are basically only three ways to extract the necessary billions out of Medicare. One is to make Medicare beneficiaries pay more. Another is to reduce the quality and/or quantity of care that Medicare delivers. And the third is to deliver the same services more efficiently. Naturally, everyone prefers the third option. But no serious person believes that efficiency alone can produce the necessary savings. And even efficiency is not a free lunch. The fat in the current health-care financing system, both public and private, helps to support teaching hospitals, medical research and health care for people without insurance. Squeezing out the fat means squeezing out these indirect subsidies. It also will involve disconcerting changes for Medicare beneficiaries.
Among the various proposals out there for reforming Medicare, one is strikingly absent. Nobody is suggesting that Medicare should be turned into block grants for the states, as many are proposing for other federal programs, including Medicaid, the health-care system for the poor. Apparently, the vaunted superiority of state governments--their magical ability to find solutions that elude Washington--is not to be trusted when a popular federal program is at stake.
Of the proposals that actually are under discussion, some are variations on what might be called "the King Canute solution": just order the tide of Medicare spending to stop. The King Canute solution comes in large and small sizes. The large version is a cap on total Medicare spending. But a cap is not a plan; it is merely an aspiration. It puts off the inevitable decisions about how exactly the spending tide is to be stopped, and at whose expense.
The small-size King Canute solution is the one most often resorted to in past attempts to restrain Medicare costs: ever tighter restrictions on payments to doctors, hospitals and so on. There is nothing wrong with squeezing health-care suppliers; Medicare has been a gold mine for them, and the government--as the nation's largest purchaser of health care--has the right and duty to get the best deal it can. But past efforts have been ham-handed and may have reached their limits. And without a market mechanism at work, it is impossible to say whether a provider is charging too much, not enough or just the right amount.
The most direct way to save money on Medicare is by slicing benefits. One simple approach would be to raise the qualifying age. The case for this (as with Social Security) is that life expectancy has increased since the program started, and therefore 65 is no longer as old as it used to be. The case against it is that cutting benefits in this particular way takes most from those who happen to die earlier--disproportionately, blacks and the poor--after paying into the system all their working lives. They are already losers in both the game of life and the game of Medicare. Why penalize them further?