Trustees’ Report Builds Case for Medicare Reform
A report released last month by Medicare and Social Security trustees provided a "wake-up call" that indicates "what is needed are not minor adjustments" but a "major overhaul" of Medicare, Thomas Saving, a public trustee and director of the Private Enterprise Research Center at Texas A&M University, writes in a Wall Street Journal opinion piece. The report for the first time estimated that general revenue contributions will exceed 45% of total Medicare expenditures for two consecutive years, 2012 and 2013.
According to Saving, "In general, no reform should be taken seriously unless it is specifically designed to slow the rate of growth of health care spending." He writes, "On the demand side, someone must choose between health care and other uses of money," and, on "the supply side, the way health care is produced must fundamentally be changed, replacing cost-increasing innovations with cost-reducing ones."
In addition, "we must still address the problem of pay-as-you-go financing" because currently "every dollar in Medicare payroll taxes is immediately spent," rather than saved or invested, Saving writes.
"The alternative is to move to a funded system in which each generation saves and invests in order to pay for its own benefits," but "we need to act quickly" to "introduce reforms that capture the earning potential of the baby boom generation before they escape into retirement and leave the young with a burden that will be increasingly burdensome," according to Saving.
He concludes, "If our policymakers wait to address the growing deficits until they are out of control, the solutions will be drastic and painful. Let us hope that the current wake-up call is not ignored" (Saving, Wall Street Journal, 5/9).