Why Democrats SHOULD Support the Lieberman/Coburn Medicare Proposal

DEMOCRATS MUST ACT TO REDUCE GOVERNMENT HEALTH CARE SPENDING

As a Democrat, it comes with no sense of ideological fervor or compelling political joy that I announce my support for the Medicare reduction proposal being offered by Senators Joseph Lieberman (I-CT) and Tom Coburn (R-OK). The Medicare Program has been a cornerstone of liberal orthodoxy and one of civilization's crown achievements of the 20th century. And so, it is with this understanding that I now make a case for the program's reduction. Given the current economic climate, which shows mountains of deficits and debt as far as the eye can see, it is time we reevaluate the Medicare Program and make it functionally sound so generations to come can count on its sustained solvency.

Sen. Lieberman and Coburn unveiled an ambitious plan this week to reduce Medicare costs by gradually increasing the eligibility age, requiring higher out of pocket costs from wealthier individuals and couples, and by restructuring Medicare's cost sharing and reimbursement policies. This plan comes on the heels of a recent Congressional Budget Office (CBO) report which showed dangerous levels of debt and deficits in the coming decades. As the CBO made clear in its latest report (http://1.usa.gov/kXMqXh), the U.S. budget deficits are "daunting". It reports that deficits in recent years are the largest, as a share of the economy, since 1945. Moreover, by the end of this year, the debt held by the public will reach 70 percent of Gross Domestic Product -- a number not seen since the end of WW II. The report goes on to state that under current law, spending on mandatory health care programs alone will increase from less than 6% of GDP today to more than 9% in 2035 and increase thereafter. Compounding the problem further, the retirement of the baby boom generation assures that government health expenditures will increase sharply as a greater portion of the population draws on Medicare, Medicaid, and Social Security. It is precisely this combination of sustained structural deficits, and an inevitable demographic shift, that portends massive financial hardship for America including the real possibility of default over the medium and long term.

The CBO goes on to state that such massive annual deficits and accumulated debts were not merely the result of the recession, but indeed deeper revenue and spending imbalances that date back some time. While tax revenues as a percentage of GDP are the lowest in 60 years, spending as a percentage of GDP is the highest in four decades. Such glaring and obvious imbalances reflect not only the gravity of the situation we currently find ourselves in, but also demonstrate the staggering incompetence of Washington to perform basic accounting when legislating.

As we consider ways to reduce annual deficits, bring down our $14.5 trillion debt, and create a stronger environment for economic growth, it is imperative we find a smart, effective, and balanced approach to reducing spending and raising revenues where possible. And let it be known, it is indeed possible. This is not to say, it will be without hardship. Whenever we extend ourselves beyond our means, the ensuing belt tightening process is always uncomfortable. But it is the exceptional nature of American greatness and a sense of unified national purpose that must ripen, one that moves beyond the petty and short-sided political brinksmanship that pervades our current political system. We can begin to put ourselves on a more sustainable financial trajectory, and it begins with policies that serve up a dose of touch medicine and legitimately address the underlying causes of accrued debt without fear of short term political reprisal. The Lieberman/Coburn Medicare Proposal (LCMP) is an important start.

For Democrats its never easy to make a case for reduced social spending, particularly when the reductions come from a beloved program like Medicare. But quite simply -- its where the MONEY is. Medicare, Medicaid, and the CHIP programs account for more than 21% of the Federal Budget. Of this, Medicare accounts for around 2/3 with approximately $452 billion spent on Medicare in 2010. Putting the growth trajectory of Medicare in perspective, in 2007 the CBO reported that Federal expenditures on Medicare and Medicaid could increase from 4% in 2007 to 19% in 2082. Such a dramatic shift would radically reorient the US economy with a disproportionate amount of national GDP funding government run health programs.

This is why we must remake the Medicare program to better align with the budgetary needs of 2011 and the demographic realities of the retirement generation. The LCMP aims to reduce Medicare spending by $600 billion over the next 10 years representing a significant step towards controlling government health care costs and immediately reducing annual deficits. The plan reduces spending by doing 3 critically important things:

1) Raise the Eligibility Requirement - According to the Centers for Disease Control, when Medicare was passed in 1965, the average lifespan for Americans was 70.2. In 2006, the average lifespan for Americans was 77.7 – an increase of 10.6%. This increase in the length of time an enrollee may be covered by Medicare has significantly raised the costs of the overall program. The LCMP would bring the eligibility requirement more in line with the original formula used for appropriating Medicare dollars.

2) Require Higher Out of Pocket Costs from Wealthy Individuals and Couples - The Lieberman/Coburn proposal will ask wealthier Americans to pay for more of their Medicare. The proposal will do this by increasing the newly created annual maximum out-of-pocket cap to higher levels for those with significant monetary means. This reflects the progressive structure of our tax system which requires that those with greater means contribute more.

3) Restructuring Cost Sharing and Reimbursement - The LCMP changes the way that costs are shared by Medicare enrollees and the government and changes the nature of Medicare reimbursement . Without getting into the arcane details of the various changes, the plan essentially requires that enrollees share an additional burden of out of pocket or up front deductibles where prudent. This is not to say, this is simply cost shifting. But rather it seeks to require higher out of pocket costs where certain groups or classes of individuals disproportionately draw on benefits relative to what they pay in. The plan also restructures reimbursement to hospitals and physicians to assure consistent and sustainable expenditures over the long term.

All of these measures, in conjunction, comprise a responsible set of policies designed to reign in the strangling costs of health care for the U.S. government. Do they require some seniors to pay more out of pocket in specific instances? The answer is unequivocally, yes. Does it mean that retirees will have to wait longer to receive Medicare benefits? Again, a definitive yes. And these are hard things to swallow for myself and the many constituencies that donate blood, sweat, and tears to Democratic causes. However, such hardship doesn't automatically assume ideological recalcitrance. Putting the program on a more sustainable footing while reducing the long term deficit and debt ensures that the very seniors Democrats wish to protect are able to draw on the program for generations to come while assuring America's economy remains strong. Of course, this measure is a spending side reduction. And true deficit and debt reduction will need to be accompanied by serious revenue increases either through the closing of loopholes and/or raising marginal tax rates on the highest tax bracket.

In closing, the LCMP is a significant first step towards re-balancing the government to meet the needs of today's economic environment. While for Democrats it is a tough pill to swallow, ensuring that Medicare is solvent makes the LCMPP the right medicine at the right time.