Congress Must Address Future Medicare Funding Issues, Federal Reserve Chair Says
Congress should work to address future funding problems in Social Security, as well as "far larger shortfalls in Medicare," Federal Reserve Chair Alan Greenspan said on Thursday at a House committee hearing, USA Today reports. During the hearing, which focused on Social Security and President Bush's proposed reforms, Greenspan said that although the short-term economic outlook for the United States is positive, the long-term picture is grimmer because the aging population will place pressure on Social Security and Medicare and slow economic growth (Kirchhoff, USA Today, 2/18).
Greenspan said neither Social Security nor Medicare is currently in crisis because the impending financial problems are not "going to happen tomorrow" (Allen, Washington Post, 2/18). He added that Congress' "first priority" should be to assure that "deficits are under control" (USA Today, 2/18).
In testimony Wednesday before the Senate Banking, Housing and Urban Affairs Committee, Greenspan noted that the Medicare "problem is ... several multiples more difficult than is Social Security."
However, he emphasized that despite the larger problems in Medicare, lawmakers "probably ought not to address the medical issue quite yet, until we get much further down the road in the advance in information technology in the medical area," which could help reduce costs. He added, "If we do it now or even next year, I'm fearful we would be restructuring an obsolete model and have to come back and undo it."
According to CQ HealthBeat, Greenspan's remarks "concu[r]" with a report released Thursday by the Employee Benefit Research Institute. According to the report, Medicare will soon account for a "greater and rapidly growing share of the nation's gross domestic product, sending Medicare into insolvency 23 years before Social Security," CQ HealthBeat reports.
EBRI says that Medicare's nearly $28 trillion in unfunded liability is more than seven times Social Security's $3.7 trillion.
At a hearing on Bush's proposed fiscal year 2006 federal budget on Thursday, Senate Budget Committee Chair Judd Gregg (R-N.H.) "spotlight[ed]" the rising future costs of Medicare and Medicaid, CQ HealthBeat reports.
According to CQ HealthBeat, Gregg hoped to call attention to the "startling and sobering" cost estimates to "build support for reining in Medicare entitlement spending. Noting that Bush's FY 2006 budget proposal seeks to address Medicaid spending but not Medicare spending, Gregg "conceded that he lacks the support he needs from the [Bush] administration and in Congress to tackle the Medicare entitlement" in his budget proposal, CQ HealthBeat reports.
Economists and lawmakers at the hearing discussed a number of methods for reducing spending, including improving market competition, raising copayments, improving efficiency, ending incentive payments to HMOs, legalizing prescription drug reimportation, allowing HHS to negotiate with pharmaceutical companies and eliminating mandated benefits for optional populations in state Medicaid programs (CQ HealthBeat, 2/17).
In related news, a "little-noticed" provision in Bush's budget proposal shows that Medicare will pay managed care plans $8.3 billion more over the next five years than was previously planned, CongressDaily reports.
According to CongressDaily, CMS has decided to delay full implementation of a cost-saving strategy known as risk adjustment, under which some private plans are paid less to account for the fact that they generally attract healthier beneficiaries than traditional, fee-for-service Medicare. The strategy was scheduled to begin fully in 2007, but the budget proposal shows risk adjustment being phased in over four years in an effort to attract more private health plans to Medicare.
"The goal is to create a better, more stable environment for plan participation," an HHS spokesperson said, adding that Medicare will save $25 billion by using risk adjustment from FY 2011 to FY 2015.
During a House Ways and Means Committee hearing to discuss Bush's budget proposal, Rep. Pete Stark (D-Calif.) said the additional $8.3 billion "is another giveaway to the managed care plans." He also said that Medicare Advantage plans are less efficient than traditional fee-for-service Medicare, adding that he would bet HHS Secretary Mike Leavitt "1,000 bucks to the charity of his choice" that the private health plans would not save Medicare money.
Leavitt did not respond directly to Stark's comments but said, "The president believes, as I do, that the way to achieve (savings) is through the free market" (Heil, CongressDaily, 2/18).
It is a "big mistake" that "Americans are talking about problems facing the Social Security system" while paying "little attention" to Medicare, San Francisco Chronicle columnist David Lazarus writes in his "Lazarus at Large" column.
Lazarus adds that most experts "believe that Medicare's issues can't be adequately addressed without overhauling the nation's entire health care system." He notes that Bush's "new prescription drug benefit" will "stretc[h]" Medicare's finances "even thinner," yet Bush has "indicated ... that he won't budge on the matter."
Bush might be correct that the addition of a prescription drug benefit to Medicare is a "landmark achievement," but he has "yet to explain how he -- and U.S. taxpayers -- will pay for it all," Lazarus writes, concluding, "The really hard part, in other words, is still to come" (Lazarus, San Francisco Chronicle, 2/18).