The Medicare Trap: Can the Supercommittee’s Cuts Be Fair?

One way or another, the costs of the Medicare program must be cut. That likelihood can of course be averted in part by raising taxes, means testing, increasing copayments and deductibles, and raising the age of eligibility for benefits.

Given the political climate, a significant tax increase is not likely, and even the other possibilities are not likely going to be sufficient. That most dreaded option, by Democrats and Republicans alike, a direct cut in benefits, will be necessary. Can it be done equitably, with everyone sharing the burden in a fair way?

My straight answer is: probably not. The best that might be achieved will be to keep the inequity at a low, tolerable level – that is, insofar as one can speak of what sounds like an oxymoron, a fair inequity. The reasons for that outcome are not hard to find. All major actors in health care have good reasons – in their own eyes – why cuts should not be visited on them, and many of them are engaging in a form of hostage-taking to show the dangers of tampering with their reimbursements or benefits.

Doctors don’t want their Medicare or Medicaid reimbursements cut and threaten that they will stop taking patients in those programs if that happens. That threat has been successful every year for many years in persuading Congress to set aside its long-standing mandate for annual reductions in reimbursements.

Hospitals are no less receptive. Their threat is more indirect: we will not be able to handle the costs of caring for patients, already a problem for many hospitals on the margins of financial solvency.

The elderly and the public by a large majority, as shown consistently by public opinion surveys over a long period of time, do not want benefit cuts (and aren’t enthusiastic about higher taxes either). The implicit threat message to politicians is that they will not be reelected if they go after Medicare. And the elderly of course do not want cuts because they have paid their taxes over the years for it and feel entitled to Medicare benefits.

Even now what they get is often not enough. The elderly spend an average of between $3000 and $10,000 out of pocket a year, many being forced into bankruptcy. The theoretical, even high probability, danger that Medicare itself may eventually be destroyed if costs are not controlled does not have the nasty bite of benefit cuts, which will hurt current Medicare beneficiaries immediately and personally.

Equity would require that each of the affected groups, patients and providers alike, be burdened more or less simultaneously and in ways that, if not perfect, at least does not lead to outrage and a gross sense of unfairness. Why are they picking on us and not everyone else? That would be a reasonable question to ask if some were obviously hit harder than others. Even so, a kind of putative equality – everyone gets cut equally – does not obviate the possibility, even likelihood, that some groups will have greater problems than others in bearing the burden.

If the supercommittee of 12 cannot come to a consensus on balancing tax increases and benefit cuts, that will automatically trigger an across-the-board 2% reduction a year in Medicare payments. That kind of flat cutting, however the cuts will be calculated, is hardly likely to have the nuance necessary to get an equitable balance.

My solution: a parallel private committee, put together at once and bringing representatives of the major groups together, should be organized by one of the health care foundations or the Institute of Medicine. The supercommittee has to make its recommendations, or failure to agree, known by November 23. The parallel committee should have its work done by mid-to-late October to get its findings before the supercommittee while the latter still has time to act on its findings. The charge to the parallel committee should be straightforward: see if you can work out a fair plan to achieve some reasonable agreement on the equitable sharing of the cost burden.

Daniel Callahan, co-editor of the Health Care Cost Monitor, is the author most recently of Taming the Beloved Beast: How Medical Technology Costs are Destroying Our Health Care System.

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  1. Tom says:

    I don’t understand why Medicare is targeted for cuts, while groups like the PNHP constantly point out how efficiently it provides its services; how with a few changes we could make it available to everyone; and how the major source of healthcare steadfastly remains in the greedy, inefficient hands of profit-making insurers. As Winston Churchill pointed out, America can be counted on to do the right thing–after it has done every possible wrong thing!

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