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March 11, 1999

OP-ED

"THE DEMANDS ON MEDICARE"

By: CONGRESSMAN BILL THOMAS, R-CA
Co-Chair, National Bipartisan Commission on the Future of Medicare

If Medicare continues on its present course, the "trust fund" that pays for the hospital care of our senior citizens will go broke in about a decade. After that, things only get worse.

Medicare uses tax dollars to pay for senior citizens’ health care. On its current course it will demand increasingly large amounts of tax revenues. Medicare now accounts for 12 percent of the Federal budget. If changes are not made it will consume between 28 and 38 percent of the budget in 2030. To prevent this from happening and to preserve Medicare, we must:

• Use taxpayer funds efficiently
• Promote efficiency in delivery of health care
• Provide more flexibility for beneficiaries and health care professionals
• Respond to beneficiaries’ differing insurance and health care needs

The National Bipartisan Commission on the Future of Medicare, of which I am co-chairman, was created by Congress to recommend ways to put Medicare on a stable financial footing and to ensure its long-term future. The Commission is to report its recommendations to Congress and the President shortly.

The world has changed dramatically since Medicare was created. Because medicine has made tremendous advances, Medicare is paying for many medical services that did not exist in 1966. MRI and CT scans, knee and hip replacements, angiograms, coronary artery bypass operations, fiber-optic endoscopic procedures, organ transplants … all are new, all help patients, and all are expensive.

Thanks to this wonderful new medical technology, people are living longer. A person who turned 65 in 1965 could expect to live another 14 years. The same person turning 65 today looks forward to at least 17 additional years of life—an increase in life expectancy of more than 20 percent. And the quality of life is much better. That’s good news.

But the reality for Medicare is that as people live longer they need more Medicare benefits, which adds billions of dollars every year to the cost of Medicare. On top of this, more retirees are entering the system -- more than at any other time in Medicare’s history. In just 12 years, 77 million Baby Boomers (people who were born between 1946 and 1964) will begin turning 65 and be eligible for Medicare. In 1968 there were 20 million Medicare beneficiaries. Today there are 40 million. And in 30 years there will be almost 80 million beneficiaries.

More people are benefitting from more sophisticated services, and they are receiving care over a longer period of time. Someone must pay for this care. That "someone" is the working taxpayer. Medicare operates on a pay-as-you-go basis. Benefits are paid out of tax revenues as they are received. The payroll taxes of the working population fund hospital care. Income taxes, paid mainly by the working population, fund 75 percent of the cost of the care senior citizens receive from their physicians. Each generation of Medicare beneficiary depends on the next generation to pay for their medical care.

However, the reality is that in the future there will be fewer workers per retiree to pay for Medicare. The Baby Boomers have been a "bust" when it comes to having children who will pay for their care. A lower birth rate and an increase in the Medicare-eligible population add up to one fact: there are fewer workers to pay for more retired people. Beginning in 1965, when Medicare was created, and continuing to the present, there have been about 4 workers paying taxes to cover the health care costs of each retiree. By the year 2030, however, there will be only 2.3 workers paying taxes to fund each retiree’s health care. Senior citizens will represent 20% of the population—more than double their percentage when Medicare began.

These facts are clear and cannot be changed. The number of us who will be eligible for Medicare and the number of taxpayers who will be paying for our health care for the next 20 years are essentially set.

We cannot save Medicare unless we adjust to these new realities. Our Commission is developing reforms that will increase senior citizens’ ability to receive their Medicare coverage through a private plan of their own selection. They will make Medicare more efficient and save up to 20% of its cost. At the same time, they will make Medicare more flexible and more responsive to beneficiaries’ differing needs. These reforms will enable Medicare to accommodate the new realities it faces and put it on a stable footing for the next generation of retirees.

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